ITV Plc, owner of the U.K.’s most-watched commercial TV station, rose to the highest price since May 2007 on speculation that it may become a takeover target or unveil a buyback plan with its full-year results.
ITV climbed 2.8 percent, taking the two-day advance to 6.6 percent. Citigroup Inc. included the stock on a list of European companies that may become bid targets or start share buybacks because of their strong balance sheets and cash flow. Nomura reiterated its buy recommendation on the stock, lifting its price target to 130 pence from 125 pence.
The $16 billion takeover of Virgin Media Inc. by billionaire John Malone’s Liberty Global Inc., announced this month, was the largest media transaction since 2007 and has stirred speculation that there will be more acquisitions in media, technology and telecommunications.
“Conditions are in place for a pick-up in corporate activity,” analysts at Citigroup wrote in a note to clients dated Feb. 14. “We think we are at the start, not the end, of an M&A and re-leveraging cycle.”
ITV rose 3.30 pence to 120.90 pence at the 4:30 pm close in London. ITV is the third-best-performing stock over the past six months among companies on the Stoxx 600 Media Supersector Index, with a gain of about 40 percent. The index of 28 companies has advanced 6.8 percent in that period.
“The key focus for ITV’s upcoming results will not be the full-year 2012 financials, but any confirmation of a potential buyback,” William Mairs, a Nomura analyst, wrote in a note dated Feb. 15. Recent activity, including acquisitions, implies “a lower potential buyback range of 150-200 million pounds.”
Nomura raised its 2013 forecast for net advertising revenue, saying there are signs that the new year has started well with media buyers indicating January was up 5 percent while February is showing an increase of 2 percent and March a decline of 1 percent.
“We remain positive on ITV as it continues to deliver well against its transformational plan,” Mairs wrote, adding that there is “scope” for cash returns.
ITV is scheduled to report full-year results on Feb. 27. It will probably report an increase in pretax profit to about 445 million pounds ($688 million), according to the median estimate of analysts in a Bloomberg survey. ITV posted pretax profit of 327 million pounds in 2011 and free cash flow of 322 million pounds.