For years there has been speculation that Nielsen might someday seek to acquire Arbitron and lock up both TV and radio ratings in the US. Now analyst Jim Boyle at CL King is out with a research piece suggesting that Arbitron would be a good candidate for a private equity buyout. And we would note that The Nielsen Company is currently owned by private equity investors after going through just such a buyout. With more and more groups signing contracts for its new Portable People Meter (PPM) service, Boyle thinks Arbitron could be attractive to private equity funds.
"As the de facto radio research monopoly accelerates its revenue growth, revives its historic 30%-plus margins in the coming years in a seemingly reliable fashion, has no debt and mounting cash, we suspect ARB should eventually and logically attract suitors from the many well-funded private equity groups," Boyle said in a research report to clients.
He notes that six of the big private equity groups (PEGs) were involved in deals to buy VNU (now The Nielsen Company), Univision, Clear Channel and Ceridian, the latter the former parent company of Arbitron. If you look at those six funds which have an appetite for media and research deals, you see over 370 billion in assets and funds under control.
"It seems to us that ARB's 1.6 billion in market cap should seem the size of a proverbial appetizer to large PEGs," Boyle says. But he also notes, "That might conversely keep ARB low on the radar screen of PEGs looking for much bigger deals."
Arbitron CEO Steve Morris was charting a course in quite the opposite direction in his quarterly Wall Street conference call last week. With PPM contracts in hand from his largest radio clients, Morris said Arbitron is now on the prowl for large acquisitions to expand the company from radio ratings to the broader field of research.