- Entertainment One declined to engage, U.K. TV company says
- Canadian producer rejected $1.3 billion ITV offer as too low
Shares of Entertainment One Ltd. plunged after U.K. broadcaster ITV Plc withdrew its 1 billion-pound ($1.3 billion) offer for the owner of the popular children’s television franchise “Peppa Pig,” saying the production company was unwilling to engage in talks.
ITV’s decision to walk away -- at least for now -- follows Entertainment One’s rejection of the channel operator’s 236 pence-a-share takeover proposal on Aug. 10. Entertainment One, which is based in Toronto, said then that the bid was too low but suggested it would be open to a higher offer.
“ITV continues to believe in the strategic logic and potential benefits of acquiring E One but has a clear view of the value of the business,” ITV said in a statement Thursday. “It appears this value is different to the level at which the board of E One would currently engage in a more formal process.”
Entertainment One shares closed down 14 percent at 215.1 pence in London, where the company is listed. That was below the 217.5 pence closing price on Aug. 9, the day before ITV’s bid came to light. ITV rose 0.5 percent to 202.8 pence.
By withdrawing its offer, ITV avoids getting sucked into a bidding war. Private-equity firm KKR & Co. also was considering a bid for Entertainment One, people familiar with the situation said this month.
ITV’s statement suggested that the company might eventually renew its pursuit of Entertainment One on its preferred terms, said Neil Campling, an analyst at Northern Trust Securities. Because Entertainment One is based in Canada, it’s not covered by U.K. takeover rules, which bar suitors of British companies from returning with a new offer after withdrawing a bid.
“If it’s a game of poker, they’re showing it’s quite easy for them to walk away and say, ‘We won’t be held hostage to a higher price,’ ” he said.
Entertainment One declined to comment.
Livermore Partners, an activist hedge fund that acquired a stake in Entertainment One this year, called on the company to put itself up for sale after ITV withdrew.
“Livermore feels the board should engage and run a market process to determine the best path for all shareholders,” David Neuhauser, Livermore managing director, said by e-mail.
Livermore said Entertainment One has pursued revenue growth over profitability with an ill-conceived acquisition strategy. In January 2015, the company bought 51 percent of Mark Gordon Co., producer of “Grey’s Anatomy.” In addition to its production operations, Entertainment One distributes TV and films in Canada, Australia, the U.S. and several European countries.
A deal for Entertainment One would have boosted ITV Chief Executive Officer Adam Crozier’s strategy of expanding the broadcaster’s production business to lessen its dependence on television advertising, which is under threat from digital media. The “Peppa Pig” cartoon franchise generated more than $1 billion in worldwide retail sales in 2015.
ITV, which runs commercially funded TV channels that compete with the ad-free, publicly funded British Broadcasting Corp., has made several investments in its production arm, buying Talpa Media Holding BV, the maker of “The Voice” reality singing show, and Mammoth Screen Ltd., which produces the drama “Poldark.”