News that Elliott Investment Management has acquired an 8% stake in Nielsen with plans to push the company to sell itself in its entirety has resulted in a healthy rebound of the company’s stock. On Wednesday, shares closed up another 10 cents to $26.15.
This is close to the year-end price target on Nielsen from Brian Wieser, the prolific Senior Research Analyst of Advertising at Pivotal Research Group.
As such, he’s just downgraded Nielsen shares.
With a $27 price target for Dec. 31, 2018, Pivotal is downgrading Nielsen from “Buy” to “Hold.”
Here’s why: Elliott Investment Management’s call for an outright sale of Nielsen is viewed by Wieser as “a realistic goal,” as he thinks that there will be buyers who “see that Nielsen’s Buy segment can ultimately return to growth and see greater value in the combined Watch and Buy segments than in each of them separately.”
Further, conversations with investors over the past few weeks have conveyed to Pivotal that longer-term oriented non-activist investors would not only welcome, but would probably demand significant managerial change well beyond the departure of the company’s CEO, as was announced at the time of the company’s earnings report if Nielsen is to remain as a public company focused solely on its Watch businesses.
“Towards this end, we think Elliott will find widespread support in Nielsen actively putting itself up for sale, as investors are generally frustrated with what has appeared to be Nielsen’s inability to monitor (or manage) warning signs in its businesses and in the company’s approach to innovations, which failed to anticipate its customers’ needs as much as investors might have expected they should have,” Wieser says.
The last time Wieser wrote about Elliott’s activist efforts in the adjacent agency holding company sector was in 2014, where the fund made a large investment in Interpublic reportedly under the premise that they could encourage IPG to sell itself.
“By contrast, with Nielsen and syndicated market research-centric companies in general, the people matter somewhat less than the product, and an active sales process would not necessarily be overly disruptive to the company’s operations,” he says. “Beyond private equity funds, to whom sales have always seemed plausible at the right price (and with the right leverage), sale scenarios could include data-focused software/marketing tech companies or IT services/marketing tech/consulting firms, agency holding companies or much larger companies who sell media.”
While Wieser says it’s difficult to look Nielsen with any sort of optimism right now, “we can’t discount the relatively durable position Nielsen has in the market research industry and its capacity to produce meaningful cashflows, even if there are incremental risks through this year and probably next.”