- Studios arm could be put up for sale
- Price tag could exceed ITV's entire market value
- CEO determined to arrest share price weakness
According to reports in both The Times and the Financial Times, free-to-air public broadcaster ITV (ITV) is mulling the sale of its production division in an attempt to lift its moribund share price.
Traders seized on the story to lift the stock almost 10% to 67.7p in early trading.
WHAT IS THE BUSINESS WORTH?
Given the strong market for film and tv production assets, ITV executives believe the production business - ITV Studios, which has had major success with series such as Love Island and Downton Abbey - could fetch more than £2.5 billion.
That would make the business worth more than ITV’s entire market capitalization as of Friday’s closing price.
ITV Studios acts as a ‘holding company’ for more than 50 independent production firms across 13 companies and is one of Europe’s biggest tv producers.
In its trading update for the six months to June, ITV revealed both its Studios and Media & Entertainment arms had performed better than expected at the beginning of the year.
ITV Studios generated revenue of £927 million, an increase of 16%, putting it almost on a par with Media & Entertainment which delivered a 4% increase in revenue to £1.065 billion.
The business increased its number of formats sold in three or more countries from seven to nine while the number of high-end scripted hours produced jumped 82% during the half and revenue from streaming services grew to 19% from 16% last year.
It also strengthened its creative talent with the acquisition of Plimsoll, which produces shows for the BBC, Channel 4 and streaming services like Apple TV+, Disney + and Netflix (NFLX:NASDAQ).
WHY SELL THE BUSINESS NOW?
According to sources quoted by the Financial Times, ITV chief executive Carolyn McCall is ‘totally fed up’ with the company’s poor share price performance and in particular what she sees as the market’s failure to appreciate the value of the Studios business.
Selling the arm is an obvious way to realise value for shareholders, and McCall has already had interest from various parties according to reports.
Year-to-date, ITV shares have lost 44% even taking into account today’s positive reaction to the potential asset sale.
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