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Nielsen to buy Arbitron, forming TV, radio rating giant
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Nielsen CEO, David Calhoun, (2nd R) and company officials ring the opening bell at the New York Stock Exchange in celebration of their IPO, January 26, 2011.
Credit: Reuters/Brendan McDermid
By Jennifer Saba
Tue Dec 18, 2012 1:07pm EST
(Reuters) - Nielsen Holdings NV, the largest provider of television viewership ratings, will now dominate radio listening ratings as well.
Nielsen on Tuesday struck a deal to acquire its radio counterpart, Arbitron Inc, for $1.26 billion. The deal creates a powerhouse that places the measurement of audience for TV and radio under the control of one company.
The $48-per-share purchase price represents a 26 percent premium to Arbitron's Monday closing price on the New York Stock Exchange. News of the deal sent Arbitron shares up 23.6 percent to $47.02 on Tuesday afternoon on the New York Stock Exchange. Nielsen shares were up 2.6 percent at $30.38.
Ratings - Nielsen's in TV and Arbitron's in radio - help determine how much advertisers are charged to run commercials during TV programs and radio listening hours. The higher the rating, the more people there are watching and listening. That translates into a higher price for a commercial spot.
"It's a huge deal for Nielsen," said Edward Atorino, an analyst with Benchmark Co. "It adds radio, which is a huge market."
The transaction has been approved by the boards of both companies but still needs regulatory approval. Nielsen and Arbitron did not cite a closing date but both companies expect the deal to go through.
Nielsen said it will pay Arbitron a 10 percent breakup fee if the acquisition is not approved by regulators.
Brian Wieser, an analyst with Pivotal Research Group, noted there is a risk that the merger will not be approved.
"The combination of Nielsen and Arbitron means that competition is increasingly unlikely to emerge, and thus radio station owners will require assurances that prices won't rise excessively and that measurement quality will not fall in any meaningful way," he wrote in a note about the deal.
BELIEVES IN RADIO
While it is best-known for TV ratings, Nielsen also provides a host of other data services including the measurement of traffic to websites, competing in that area with comScore Inc. It also provides information about what consumers buy at retail stores.
By acquiring Arbitron, Nielsen also gains access to what is known in industry parlance as "out-of-home," essentially billboards and other forms of outdoor advertising.
"We measure what (consumers) buy everywhere in the world and we measure what they watch," Nielsen Chief Executive David Calhoun told analysts on a conference call. "The real magic for us is the ability to link the two of those consumer behaviors."
Nielsen has come under fire in recent years for how its TV ratings are compiled, with many industry executives complaining that its measurements fail to reflect accurately viewership of on-demand television and engagement on social media.
The company, which was bought by a group of private equity players including Blackstone Group LP, Carlyle Group LP and KKR & Co LP, and which went public in 2011, has been working to improve its measurement services and expand into other areas.
For instance, Nielsen on Monday announced a partnership with Twitter to publish a new set of ratings that measure chatter on the social network about TV programming.
TOO PRICEY?
With Arbitron, Nielsen said it plans to expand its "Watch" measurement that keeps tabs on consumer viewing and listening habits across multiple screens such as TV, computers and mobile devices.
One analyst wondered if Nielsen was paying too much for a company that covers a medium that has been in decline for years.
"It seems like a pretty steep premium," said Evercore Research analyst Doug Arthur.
Radio's share of U.S. advertising spend is expected to decline to 9.3 percent this year from 9.6 percent in 2011, according to research firm eMarketer.
"Do we believe in the medium?" Calhoun asked rhetorically during the call, describing it as the crucial question behind the acquisition.
"The answer was unequivocal from all of our team who live in the digital world and live in all of these places. Yes."
Arbitron and Nielsen executives pointed to the fact that Arbitron also measures streaming music over the Web.
The acquisition will add about 13 cents per share to Nielsen's adjusted profit beginning in the first year after completion, the company said.
Arbitron reported revenue of $445 million for the 12 months ended September 30.
(Reporting by Sayantani Ghosh in Bangalore and Jennifer Saba in New York; editing by Peter Lauria, Roshni Menon, John Wallace and Matthew Lewis)
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