ProSieben
NBCUniversal could buy ProSieben
HOLD
Target price €32 | Published price €25
With the shares being down >30% YTD, ProSieben flags up as an obvious M&A target. We believe NBCUniversal, the TV network owned by Comcast, could be interested in the company. NBC has previously expressed interest for ProSieben, it knows the German TV ad market and could offer significant cost synergies for ProSieben's US-heavy programming grid. ProSieben's announcement last night that the current CEO Thomas Ebeling will step down in February 2018 (ahead of his contract end) might additionally trigger such as deal.
Attractions of ProSieben and the German TV advertising market
> Print overweight: The German media mix is still largely exposed to print advertising with it making up c.33% of the mix (vs 11% for the UK and US respectively) and a total of c.€6bn. This suggests that other media owners have scope to take some of the print advertising money as its share falls more in line with the European/US average.
> Duopolistic market structure: The German TV ad market also offers high barriers to entry through its duopolistic nature with ProSieben and RTL (BUY, TP €123) taking c.80% share for the TV ad market.
> New revenue streams: On top of these two features the German TV ad broadcasters, as other broadcasters, are set to benefit from new revenue streams such as distribution fees, which tend to be c.100% margin.
> Potential assets to be sold: ProSieben has suggested previously that it was in discussions for some of its Ventures & Commerce portfolio.
Comcast's NBCUniversal could acquire ProSieben
NBCUniversal (the TV network owned by Comcast) has publicly stated for a number of years that it is interested in non-US assets. These statements have now been accentuated by its parent company, Comcast, which has approached 21st Century Fox for its TV and Production assets. The talks between Comcast and 21st Century Fox include the latter's international assets as Comcast aims to diversify its revenue mix into non-US assets. Comcast's taste for entertainment assets has been maintained since its purchase of NBCUniversal in 2011.
We believe the German market and more specifically ProSieben could be a target for NBCUniversal. because: 1) NBCUniversal has expressed interest for ProSieben in the past (in 2005) but the deal never came through; 2) It knows the German advertising market as it operated two pay-tv channels in a JV with A+E Networks for 12 years; 3) It also previously owned a Free-to-air channel in Germany and repeatedly was quoted looking for opportunities in Germany.
We believe ProSieben lends itself particularly well as an M&A target through its overweight to US content. (We have written about this here). |
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