Howard County officials are keeping close watch on the Nielsen Holdings N.V.’s $1.26 billion acquisition of Columbia-based Arbitron this week, a deal that stock analysts say is “very attractive.”
The New York television ratings provider announced Tuesday its decision to purchase radio ratings service Arbitron for $48 per share in cash. The offer represents a premium of about 26 percent to Arbitron’s closing price Monday.
Arbitron spokesman Tom Mocarsky said it was too early to speculate on what the acquisition, which surprised some analysts, means for Arbitron’s employees, including 650 in the state, and its Maryland headquarters.
Laura A. Neuman, CEO for the Howard County Economic Development Authority, said the county has reached out to Arbitron and will do whatever it can to keep the firm in Howard County. But she agreed that it was too early to address Arbitron’s future.
Representatives of the Maryland Department of Economic Development were not available for comment by deadline Thursday. Just this week, it was announced that the state’s Economic Development Assistance Fund would contribute a $2 million conditional loan to Sodexo, a food services and facilities management firm based in Gaithersburg, to keep the company in Montgomery County. Sodexo, with more than 500 full-time employees, also is receiving $1.5 million from the county and $500,000 from Gaithersburg’s Economic Opportunities Fund.
The boards of both Nielsen and Arbitron have approved the acquisition, which also is subject to regulatory review. The selling price is about 19 times what Arbitron analyst CJS Securities in White Plains, N.Y., had projected for the company for 2013, said analyst Daniel Moore.
Arbitron has spent the past 63 years providing radio ratings for the industry, in the same vein as Nielsen does for television. The Columbia company uses an electronic meter in the largest 48 radio markets in the U.S. and mailed diaries for those outside the top markets, Mocarsky said.
More than 1,000 people work for Arbitron nationwide, with 650 of them employed full time in Maryland, he said.
“Certainly, we are very excited about the prospects of bringing the collective resources, capabilities and commitments of our companies and our employees to bear for the benefit of our respective customer bases,” Sean R. Creamer, COO and executive vice president for Arbitron, said in a conference call on the sale.
Being able to leverage Nielsen’s wealth of media, consumer information, online capabilities and analytical tools was “compelling,” Creamer said. “We are the currency for the radio.”
Together, Nielsen and Arbitron generated total revenues of $6 billion for the 12 months ended Sept. 30, according to the companies’ joint statement.
Arbitron stock sold at a 52-week high of $47.05 on Wednesday, though it closed at $46.52. Nielsen had a high of $31 and closed at $30.54.
This deal opens up opportunities for Arbitron to tap into Nielsen’s global footprint and grow internationally, Moore said.
The union also joins the radio medium to Nielsen’s buy-side data, which are collected from consumer purchases and made available so businesses can target advertising to the people most likely to buy, said Rich Tullo, an analyst with Albert Fried Co. in New York.
“From a strategic perspective, this is a very attractive deal,” he said, adding that Arbitron’s cash flow might pay for the deal in seven years.
Tullo said he was a bit surprised by the acquisition because it raises anti-trust questions; together the companies hold the largest market share on radio and TV ratings. Others brought up the same concerns during the conference call.
“That’s for the regulators to decide,” said Nielsen CEO David L. Calhoun.
While Mocarsky acknowledged that the deal came together in a “relatively short time frame,” he emphasized it was a “robust, competitive process.”
Moore said a merger between the two companies has been discussed on and off for years.
“This was just the right time,” Calhoun said during the conference call, boasting that this links two cultures that are focused on “excellence, innovation and research.”
The deal will allow for $20 million in cost synergies between Arbitron and Nielsen, he said.
During the conference call, another analyst questioned whether the radio industry is growing enough to justify the deal. Both Calhoun and Creamer stressed their support of the medium.
Creamer added that the radio industry is redefining itself with the advent of digital radio stations such as Pandora.
Arbitron reported $325.1 million in revenues for the first nine months of the fiscal year through Sept. 30, according to the U.S. Securities & Exchange Commission. The company also generated $43.6 million in net income, an increase from $39.2 million for the same period in 2011.
Nielsen reported $4.1 billion in revenues for the first nine months and $234 million in net income, up from a $9 million loss for the same period last year.