“I’m a friend first, boss second. Probably an entertainer third,” David Brent once said. Hopefully, Adam Crozier didn’t take any tips from Brent before the boss of ITV tried to sweet-talk Entertainment One (eOne) into accepting a £1.03bn takeover proposal.
The star of The Office features in the new film, David Brent, Life on the Road, which is released this month and is being distributed by eOne.
Film distribution isn’t really ITV’s bag but that has not stopped it from tabling a £1.03bn “proposal” to buy eOne. The “proposal” has been unanimously rejected by the eOne board, which said in a statement that it “fundamentally undervalues the company and its prospects”.
The word “proposal” is important because it helps ITV and eOne to avoid the Takeover Panel triggering a four-week deadline for the saga to be resolved. The Takeover Panel has not covered itself in glory here. Rumours of ITV’s interest in eOne have been allowed to rumble on for months without any official comment.
The deal may not happen. ITV’s 236p per share offer may represent a 19% premium to eOne’s closing share price on Monday, the day before the proposal but it needs to be increased if the company is to secure a deal.
A year ago, shares in eOne were trading at well over 300p. Investors became unsettled by a refinancing of its debt and a £200m rights issue to increase its stake in the company that produces Peppa Pig to more than 85%. CPP, the Canadian pension fund, now owns almost 20% of eOne after buying in last September at about 269p. It is unlikely to accept a loss on its investment so quickly and it has a seat on the board of the company, so its views are influential.
Peppa Pig is the company’s most famous asset – certainly in the UK – and it generates more than $1bn (£769m) in annual revenues. An acquisition of the production arm of eOne would make sense for ITV as it steps up its strategy of buying content with international growth potential and bringing TV studios in-house. eOne also owns a majority stake in the Mark Gordon Company, producer of the US dramas Grey’s Anatomy and Ray Donovan.
eOne is much more than TV production though. In the year to 31 March, £553m of its £803m revenues were from the film business, which can be notoriously volatile and relies upon a handful of titles becoming blockbusters. Indeed, the growth of its TV business and a decline in film meant that the latter accounted for less than half of eOne’s underlying profits in the last year.
The size of the film distribution business – which has enjoyed a hit in Steven Spielberg’s BFG – means that it is not a straightforward decision for ITV to increase its offer.
eOne will give ITV a further foothold in TV production, diversification into the US and films, and experience of how to monetise a popular programme such as Peppa Pig into lucrative merchandise and toy sales. But City insiders expect ITV to take its time before making another move. ITV must be careful not to pay much beyond its existing offer, given the mixed bag it would be taking on. Shares in eOne settled at 236.99p on Wednesday night, just above the offer price, suggesting that ITV might not have to go much further to win over shareholders.
On firmer ground
The Olympics in Rio de Janeiro brings back fond memories of London 2012 for many people in the UK. Not for G4S, however. The company was dragged into a crisis just days before the 2012 Olympics after failing to recruit enough security staff for the Games, which lead to the Army being called in.
Interviewing Nick Buckles, then chief executive of G4S, at the height of the crisis was extraordinary. Buckles looked and spoke like a man who had could not comprehend what had happened.
Unsurprisingly, he was gone as chief executive within a year. G4S had become too big for him, sprawling over 125 countries and hundreds of thousands of workers. Other scandals have emerged too.
Four years on from London 2012, Ashley Almanza, Buckles’ successor, is still rebuilding the world’s biggest security company. G4S on Wednesday reported a 3% rise in half-year revenues and a 44% rise in pre-tax profits to £115m.
The company’s share price is well down on the peak of the Buckles era and it is still embroiled in controversy, but at least G4S is on firmer ground.
