One week ago, Wall Street was abuzz over a report in The Wall Street Report suggesting that Nielsen Holdings was nearing the end of negotiations with a consortium led by shareholder Elliott Management Corp.
The WSJ report warned that such a transaction could fall apart, although it seemed unlikely given the news organization’s track record on similar rumor-turned-reality deals.
Alas, the proposal, which Nielsen acknowledged in a statement late Sunday, has been firmly rejected by the nation’s dominant audience measurement company.
The decision to say no to the proposal from the Elliott-led consortium was decided upon by Nielsen’s Board of Directors.
An unsolicited acquisition proposal, the private equity consortium valued the company at $25.40 per share. As of 7:53pm Eastern Sunday, NLSN was priced at $24.41.
Tuesday’s trading brought an expected dip in share value, as some investors expressed their disappointment in the fight for Nielsen. At the Closing Bell, shares were off 6.9% to $22.76 in heavy trading.
The consortium’s value is one that hasn’t been seen since the first days of July 2021 for Nielsen. Furthermore, if it wasn’t for the WSJ report, Nielsen shares could have been still below $17 a share, where they stood in late February.
Why did the Nielsen board say no to the offer?
“The board reached this determination based on its comprehensive review of the proposal, with the assistance of its independent financial and legal advisors, and discussions with The WindAcre Partnership LLC under a confidentiality agreement,” the company said.
WindAcre is a “large shareholder” — actually, the third-largest, with 9.61% equity interest as of March 14, 2022 — and it has informed Nielsen and the consortium of its ability and intention to acquire a “blocking position” to prevent shareholder approval of the proposed transaction.
As such, Houston-based WindAcre has pitted itself against Elliott, the one-time activist investor with a stake in Nielsen that dates to 2018.
“The WindAcre Partnership is founded on the belief that concentrated stock-picking within a universe of good businesses, and with an owner-oriented and independent mindset, can generate attractive returns over time and across cycles,” the investment house’s website reads.
Elliott holds 4.62% interest in Nielsen, and is the ninth-largest shareholder.
There’s more: Nielsen also announced late Sunday its intention to commence share repurchases under its previously approved $1 billion share repurchase authorization when the company’s trading window opens.
KENNY COMMITMENT TO COMPANY VALUE
From the VAB to the office of Kelly Abcarian at NBCUniversal, formerly of Nielsen, there’s much disillusionment regarding the dependability of the company’s audience metrics and ability of Nielsen to provide a single cross-media metric to their liking.
The company has long taken its lump from disgruntled radio industry executives.
Yet, Nielsen’s Board expressed confidence in the company’s standalone prospects, and unanimously determined that the consortium’s offer “significantly undervalues” Nielsen. The offer also, in the Board’s view, “does not adequately compensate shareholders for Nielsen’s growth prospects.”
To some, that may be a bold statement, considering Nielsen’s stock performance.
Nielsen sees it differently.
“As Nielsen’s 2021 financial results demonstrate, the company is achieving strong revenue growth while making significant progress in new product development and MRC reaccreditation,” the company said, referring to its Media Rating Council issues.
Nielsen also said that it remains on track to deliver “Nielsen ONE” — something Nielsen calls “a transformative cross-media solution that will evolve the metrics underpinning the more than $100 billion video advertising ecosystem.” A 2022 rollout is still on track. “With growing relevance as audiences shift to streaming, the company is well positioned within the media ecosystem for long-term success and value creation.”
WINDACRE BLOWS AWAY ELLIOTT
Perhaps fueling Nielsen’s confidence in its snub of Elliott and its investment partners is WindAcre. After it gave feedback to the Nielsen board, it determined that the transaction would be “highly unlikely” to receive shareholder approval.
This was triggered by a series of occurrences following receipt of the Elliott-led offer. First, at the consortium’s request, Nielsen entered into a confidentiality agreement with WindAcre. This allowed WindAcre to speak with the consortium about the possibility of joining the group. Chatter transpired, resulting in WindAcre saying no to the consortium. But, this triggered WindAcre into outright opposing the transaction, and moving to do whatever it can to stop it.
In short, WindAcre views Nielsen’s intrinsic value “to be significantly higher” than values proposed by the consortium — even with the per-share premium compared to the late February 2022 closing price of $16.90 for NLSN.
WindAcre first invested in Nielsen in 2013. And, in a statement asserting its nine-year stake and greater equity interest than that of Elliott, informed Nielsen that — if it were to say yes to the consortium — WindAcre would move forward in its efforts to acquire direct ownership of sufficient shares to prevent shareholder approval of the proposed transaction.
Translation: WindAcre would do what it had to do to block Elliott and the consortium from gaining control of Nielsen.
A GAMBLE ON THE FUTURE
The last time Nielsen shares topped the $30 mark was in mid-July 2018 — well before the pandemic and COVID-19 became a household name.
Yet, with its snub of Elliott Management, the Nielsen Board believes that the value of Nielsen “is well in excess of current trading prices.”
That explains its previously approved $1 billion share repurchase authorization, it said on Sunday evening.
Nielsen has not repurchased any shares under this authorization, pending resolution of the proposal from the Consortium. This will change soon.
“With the board’s determination not to proceed with the proposal, Nielsen intends to commence share repurchases when the company’s trading window opens, currently anticipated to occur after first quarter 2022 earnings planned for April 21, subject to Nielsen’s prevailing stock price, market conditions, legal requirements and other factors.”
For Nielsen’s board, a roll of the dice is expected to be favorable to CEO David Kenny and to the company’s shareholders.
“We continue to have strong confidence in the management team and Nielsen’s strategy to create long-term value for shareholders,” said James A. Attwood, Nielsen’s Chairperson of the Board. “We are always open to exploring any avenue to create value for shareholders, but the Board is in agreement with WindAcre, one of our largest shareholders, that the Consortium’s proposal significantly undervalues the company. Further reflecting our confidence in the company, we plan to commence share repurchases, which we expect to be an important element of our ongoing balanced capital allocation strategy.”
