Nothing concentrates the mind like a suitor in the wings.
After ITV PLC (LSE:ITV) last week confirmed Comcast is in talks to buy the UK broadcaster's Media & Entertainment arm (the broadcast and streaming bit), UBS ran the numbers on what that could mean, while keeping a cool head and a 'sell' rating with a 12-month target of 72p, 7p lower than the current price.
Starting with the valuation, the figure touted for the M&E arm is £1.6 billion on an enterprise valuation basis. UBS’s discounted cash flow (DCF) is £1.5 billion, roughly in the same ballpark at eight times forecast 2026 operating profit.
If ITV banked this and used all of it to buy back shares, earnings per share (EPS) could be lifted to about 10p versus a 7.7p otherwise; more than 20% accretive.
On that arithmetic, the shares would trade on roughly seven times EPS, cheaper than listed peer Banijay at nine times.
There are plenty of caveats, though: There has not yet been a firm bid, and management has previously talked up the value of keeping production and distribution under one roof.
That's not to mention that any deal would face intense regulatory scrutiny, as the UK’s biggest commercial public broadcaster could end up owned by a non-UK group, with Comcast already owning Sky.
UBS also tweaked its model after ITV’s third-quarter update: revenue was better, mostly timing in Studios, but guidance for fourth-quarter TV total advertising revenue (TAR) was soft at minus 9% year on year.
One-off cost savings of £35 million are planned in 2025. Net effect: 2025 EPS nudged up 2%, 2026 cut 5% to 7.75p, assuming 2026 TAR grows 2% and no extra savings.