The putative £70bn takeover of Time Warner by AT&T has thrust two UK media stocks front and centre stage, according to two leading UK brokers.
Peel Hunt reckons the weakness of the pound leaves ITV PLC (LON:ITV) and Sky PLC (LON:SKY) vulnerable to an opportunistic bid – although it doesn’t specify where takeover approaches might come from.
Counting against them being taken out is the fact that both have influential major shareholders.
In the case of the satellite broadcaster it is Fox, while Britain’s leading commercial TV group has Liberty Global on its register.
“Investors need to weigh the possibility of deteriorating near-term fundamentals, against strategic value and possible capital returns,” said Peel Hunt analyst Alex DeGroote.
He rates ITV a buy up to 330p, almost double the current share price. The analyst pointed out there is scope to for the company to hand back £250mln to investors.
UBS, meanwhile, has taken a closer look at the strategic reasoning behind AT&T’s bid for movie and TV giant Warner.
In short, the deal offers the American telco the opportunity to provide “differentiated content” and the Swiss house thinks it may spark M&A activity here in Europe.
“We see Sky as a beneficiary of convergence as it benefits from additional distribution/wholesaling opportunities with the telecom operators and Sky has a critical mass of premium content in the UK, Italy and Germany for a relatively lengthy window,” said UBS analyst, Polo Tang.
“While we think Vodafone remains focused on a broader deal with Liberty, as we have stated recently, Sky could be a strategic alternative for Voda should a broader deal with Liberty not go ahead.”