Shares in UK broadcaster ITV jump 9% after reported bid interest

LONDON (Reuters) -Shares in ITV jumped 9% on Monday on a media report that the British broadcaster behind “I’m a Celebrity… Get Me Out of Here” and “Coronation Street” could be a takeover target for a team led by CVC Capital Partners.

Sky News said on Saturday that ITV’s weak share price had attracted the attention of various bidders, and some had held early stage discussions about teaming up to buy the company.

ITV is a commercial broadcaster which also has a production unit, ITV Studios, which made the dramas “Rivals” for Disney+ and “Ludwig” for the BBC.

Sky News said private equity firm CVC was planning to team up with a European broadcaster like France’s Groupe TF1, and the pair would then split the company with CVC taking on Studios and the broadcasting arm going to TF1.

Spokespeople for ITV, CVC, TF1 and its parent Bouygues all declined to comment.

All3Media, owned by RedBird Capital, and Mediawan, backed by private equity giant KKR, were also interested in ITV Studios, it said.

ITV shares were trading up 9% at 71 pence at 1030 GMT, set for their biggest one-day gain since March and giving the company a market value of 2.7 billion pounds ($3.40 billion).

The shares have fallen 40% in the last three years, hit by worries over advertising and the profitability of the company’s ITVX streaming service, prompting analysts to suggest carving up the company would boost its value.

Sky News said ITV’s Chief Executive Carolyn McCall had been discussing the merits of a demerger with financial advisers.

She has built up the Studio business, which makes a lot of ITV’s shows, to help offset volatile ad markets.

Analysts at Citi said there was a positive mix shift at ITV from broadcast to content production at the group level and from linear to streaming within broadcast.

“We also think valuation is attractive,” they said.

They said if ITV Studios were valued at a 12x enterprise value over earnings before interest and taxes multiple, the value per share of the Studios business would be about 68 pence, even including net debt and other obligations.

“Put another way, the broadcast business which, at this stage generates about 2.1 billion pounds of revenue and about 240 million pounds of operating profit, would be implicitly worth less than zero,” they said on Monday.

Analysts have speculated before that ITV could split the business, but there are benefits in holding it together: the Studios arm enjoys a more predictable revenue stream than volatile advertising, and Studios sells a lot of its programming to the ITV broadcast unit.

($1 = 0.7950 pounds)

(Reporting by Samuel Indyk, Sarah Young, Paul Sandle and Brice Makini; editing by Dhara Ranasinghe, Kate Holton and Susan Fenton)