In summary the transaction looks like a big bet on radio for UTV, as it retrenches to its Talksport brand and a number of local stations, and a vote of confidence in live TV for ITV.
Davy comments on UTV: 'The new group will now be less diversified and has chosen radio as its media asset of choice. Only time will tell if this is the right decision; however, at a price of £100 million for UTV Northern Ireland and loss-making UTV Ireland, this seems like a good deal for the group.'
In 2013, UTV’s TV division generated an operating profit of £9.7 million. But losses have mounted thanks to the launch of UTV Ireland. In 2014 the new station saw set-up costs of £2.5 million and in 2015 it is expected to post an £11.5 million loss thanks to a slow build in audience numbers as well as teething issues around the re-tuning of domestic digital receivers. The deal will also see ITV assume pensions liabilities associated with the TV operation.
Liberum which has ITV as its top pick in the media sector with a 330p price target says the deal suggests 'ITV management is more confident on the overall TV secular position i.e. It is increasing its exposure to TV'.
Analyst Ian Whittaker rules out an ITV bid for STV (STVG) 'due to the political sensitivities of Scotland's main commercial broadcaster being owned by London-based ITV Plc (and with a chairman who is an ex-Conservative Party chairman)'.