Look for business as usual from Nielsen in the months ahead as it prepares to exit the public markets and go private in a $16 billion transaction led by Evergreen Coast Capital Corp. – an affiliate of Elliott Investment Management – and Brookfield Business Partners. Analysts say they expect Nielsen to keep its existing strategy and management team in place and move forward with its Nielsen One gameplan, unfettered by the noise and distractions of Wall Street during what has been a turbulent time for media measurement.
CEO David Kenny and his team are “well regarded in terms of restoring credibility, executing and hitting their numbers quarter and in corner out, which was not always the case for this company,” said Matthew Thornton, Director of Equity Research at Truist Securities. “I would think the strategy remains the same, and it's all about delivering Nielsen One” and making it “the de facto currency for premium video transacting.”
More Freedom To Invest
Analysts say the deal gives Nielsen the freedom to make whatever investments are necessary to maintain and grow its position as the dominant media measurement provider at a time of increasing competition in the space.
Without the pressure of reporting quarterly earnings, the company will have more flexibility to invest in the short term, given that it’s “going through a fairly significant product transition here,” Thornton said.
The Nielsen board voted unanimously to support the $28-per share offer, which includes the assumption of the measurement giant’s debt and represents a 10% premium over Elliott’s earlier proposal and a 60% premium over Nielsen's stock price before the potential sale surfaced in early-March.
“Assuming shareholders agree to this transaction, Nielsen will now have the time –without public market distraction – to ramp Nielsen One and potentially drive an even faster and more profitable growth profile,” said Douglas Arthur, an analyst at Huber Research Partners.
Brian Wieser the former analyst who is now Global President of Business Intelligence at agency giant GroupM, said the private buyout is well timed “given the need to reinvent a lot of what they do, and deploy new products. It’s possible that a lot of the investment will look bumpier than most public market investors would care to see,” Wieser added.
Elliott Has ‘Seized The Day’
With a heap of private equity cash sitting on the sidelines, analysts say they weren’t surprised by the private buyout offer, especially after Nielsen’s stock traded as low as $16 a share in early 2022. “Elliott –a long term investor in Nielsen – saw an opportunity and has seized the day,” said Arthur.
Nielsen has come under increasing pressure from some of its biggest clients for measurement flaws and other missteps at a time when competing measurement providers are gaining more traction. But despite a barrage of negative press and criticism, “none of the large ad holding companies have hinted at bailing on Nielsen [and] most of the large networks, when pressed, admit that Nielsen remains the standard bearer,” Arthur said.
In addition, there has been “a significant disconnect” between how Nielsen’s largest shareholders view its long-term value and what Wall Street gives it credit for, Thornton said.
Not Your Typical Leveraged Buyout
The offer values Nielsen at a 10-times earnings multiple. The private equity consortium led by Elliott has secured fully committed debt and equity financing, including an approximately $5.7 billion equity commitment. But this isn’t your stereotypical leveraged buyout where investors swoop in to “harvest the business” by cutting costs and maximizing cash flow, Wieser points out. “Private equity transactions often occur now with an eye towards supporting growth, and finding undervalued assets, which might benefit from being private,” he says.
Investors gave the blockbuster deal a big thumbs-up – shares of “NLSN” were up 20% in trading in New York on Tuesday, closing at $26.72 for its highest finish since June 2021, a sign that investors believe the blockbuster deal will cross the finish line.
Analysts doubt a suitor will emerge with a higher offer, despite a 45-day “go shop” period that allows Nielsen to seek an “alternate proposal.” They’re also not expecting any regulatory hurdles. One question mark, however, is whether the WindAcre Partnership, one of the company’s largest shareholders, will vote in favor of the deal. “It remains to be seen whether they're going to go along with this transaction, but I don't really think it's going to matter,” said Thornton. “We think Nielsen and Elliott will be able to get the votes and they’ll get the transaction done.”