TV ratings maker Nielsen is on sale - and not for the first time. Insurer UnitedHealth builds diversified empire. IT product and service provider HP bets on work-from-home concept.
Disclaimer: when we talk about, that something has grown, we mean a comparison with the same quarter a year earlier. Since all issuers are from the USA, then all results in dollars. When creating the material, sources were used, inaccessible to users from the Russian Federation. We hope, Do you know, what to do.
A plus 28 $ investment rating: Nielsen's analytics business finds buyers
This week, a consortium of investors led by Elliott Management and Brookfield Asset offered Nielsen (NYSE: NLSN) buy her.
We will analyze the details of a possible deal:
- buy a company at a price 28 $ per share;
- in absolute terms, the purchase of Nielsen, along with its debt, will cost the consortium 16 billion;
- Nielsen want to buy with P / E 18 and P / S 2,8;
- premium to the price of the company at the moment before the first news about a possible purchase - almost 60%.
This is not the first attempt to buy Nielsen. Previously, in March, the consortium tried to buy it at a price 25,4 $ per share. Nielsen then refused to sell, because the company thought the offered price was too low. In addition, a large minority shareholder of Nielsen is the WindAcre fund with a share 10% in the company - threatened to block the deal at a shareholder vote. Foundation representatives believe, that Nielsen should cost more 40 $ per share, what hasn't happened since 2017. Whether the fund will block the new deal is still unknown..
Nielsen works in the data and information market. Services and software for collecting metrics in the media sphere are provided by companies 72,71% proceeds, and 27,29% revenue is analytics services for marketing, also in the media.
Worth considering, that Nielsen was already bought in 2006 and re-listed in 2011.
As for the prospects for Nielsen, then in the very fact of the appearance of a transaction for its purchase, I see another confirmation of the correctness of Chekhov's words: "There is no that freak, who would not find a mate, and there is no nonsense, who would not have found a suitable reader". The core of Nielsen's business is the oil lamp in an era of ubiquitous electric lighting..
Most of the company's money comes from compiling television ratings., which it determines through surveys of the population. This seems like absolute madness to me.: people often participate in surveys, who have nothing to do during working hours, which explains the mixed results of some opinion polls.
As a result, the wrong people answer about the series, who actually watched them, and they, who just picked up the phone and who has time to chat. Yes, we still have to believe, that questionnaires conscientiously sample, develop a methodology and that “matan calculated everything”.
But the key word here is "believe".. Verifying the correctness of their conclusions will be difficult and expensive.: you need to hire the same Nielsen and double-check - and even trust this re-checking company. Against the backdrop of big audit scandals like EY, who blew a major Wirecard scam, worth thinking about, Is it possible to entrust at least something to such "recheckers".
Nielsen is now being sued by media mogul Byron Allen., accusing the company of, that it incorrectly takes into account the views and popularity of his content, not really considering streaming and online, for example. Not a fact, that Allen will win, but in general he correctly pointed out the weakness of Nielsen's core business: the company polls incomprehensibly whom it is not clear how and based on its inferences, people can make wrong marketing decisions.
By the way, Nielsen's membership in the professional community of the Media Ratings Council was suspended in 2021 due to trust issues in the company's methodology and quality of work. This has happened for the first time since the 1960s., what deprives Nielsen of a medal, which allows her to justify her prices to customers.
Some companies, как Comcast, develop their research services. And then there is the OpenAP platform., which allows marketers to search for different market research services. The only thing, what keeps Nielsen afloat now, is an opinion, that there is no alternative to its ratings for traditional TV channels. But this will gradually change as the development of competition, and with the transition of TV to streaming.
Streaming services themselves consider, who and what is watching. And while they may or may not share the resulting data with the general public, they have access to this critical information, and they won't need Nielsen. They themselves see, how many people are watching movie or series, how long do they watch, how often are they reviewed. Based on this they, for example, can plan future content production policy. And slick marketers, overpaid, they don't need.
Nielsen is working on its method of accounting for streaming services in the overall statistics and is preparing to introduce it this year, but in work it will be widely used only in 2024.
Worth saying, that Nielsen is installing content meters in 40,000 households, but this is just a slightly more sophisticated method of polling: He shows, what some average group is watching. This is 100 times worse than the full detailed data., owned by the streaming service by default: Netflix was able to count, how much benefit they brought "The game of squid".
TV marketing budgets are not so easy: in streaming they grow, and in traditional TV they stagnate. In the long term, this will put pressure on Nielsen's business.. So far, the slowdown in the transition to streaming has saved her., caused largely by the lack of sufficient Internet coverage throughout America.
All in all, Nielsen is not very expensive, but not a particularly interesting and promising business with stagnating revenue. Maybe, The Elliott and Brookfield duumvirate is planning a massive overhaul of the company with the goal of listing it again later and capitalizing on the streaming hype.
If so, then this idea is: the level of competition between streaming services is huge, the number of unsubscribes is growing rapidly, and the number of streaming services is increasing. And I think, that marketing research, meeting the needs of new content distribution systems, will be very popular. Of course, given that, that their methodology and software tools will meet the needs of the era.
And obviously, that the duumvirate really, really wants to buy Nielsen: ahead of the company is the closure of multibillion-dollar debts. And not a fact, that Nielsen will be able to maintain its current level of revenue and profit in a changing TV landscape. So if Elliott and Brookfield decided to take a chance, then, as the famous fatalist Sidorovich said, "there is something".
In any case, this is very good news for all investors.: if for such a dreary company, as Nielsen, found a buyer, then businesses with more interesting prospects can count on, that they will soon receive an offer to purchase.
Medical diversification: UnitedHealth Group takes care of home care
Medical insurance company UnitedHealth Group (NYSE: UNH) acquires home health care provider LHC Group (NASDAQ: LHCG).
The company is bought at a price 170 $ per share. Her evaluation at the time of purchase: P / S — 2,45 and P / It's about 47. In absolute numbers, LHC is inexpensive - 5.4 billion.
LHC's revenue structure looks like this:
- Care of the sick at home 69,9%, segment gross margin — 41,9% from its proceeds.
- Hospice-like services for the terminally ill, as well as at home 14,1%, segment gross margin — 37,4% from its proceeds.
- Services for the chronically ill and the elderly — 8,5%, segment gross margin — 27,3% from its proceeds.
- Services in the company's hospitals - 6%, segment gross margin — 32,4% from its proceeds.
- IT Solutions, insurance — 1,6%, segment gross margin — 63,4% from its proceeds.
The company operates only in the USA.
UnitedHealth's calculation is more than clear here: she is building a conglomerate in those areas, in which he is well versed, - insurance service, distribution of medical products and insurance related matters. Nearly 70% LHC receives bills from Medicare and Medicaid.
The presence of LHC will increase UnitedHealth's revenue by 3,08%, but it can still be considered a step towards the diversification of the company. Synergy is also important here.: LHC employees are significantly cheaper than the market average. Probably, UnitedHealth will actively use the capacity of LHC to work on the insurance plans of its audience.
And I must say, home health care is a growing market in the US due to an aging population. Expected, that by 2030 revenue in this market will grow to 226.4 billion from the current 121.6 billion.
Parallel to UnitedHealth's attempt to buy medical technology company Change Healthcare (NASDAQ: CHANGE) for 13 billion dollars.
Change Healthcare is unprofitable, but promising: it provides services in the field of IT management of the administrative part of the work of medical institutions, Change Healthcare's annual report details, what services does it provide.
I believe, that Change Healthcare is buying at an affordable price - with P / S about 4,3. Her losses are not so terrible: the company's total margin is within minus 2-4% of revenue. On an operational level, the company is profitable, minus is obtained due to large payments on debts.
Think, benefits for UnitedHealth from the purchase of Change Healthcare will be very large due to synergy: its solutions will be actively sold to the already existing UnitedHealth client base and used in their own work.
US regulators blocked the deal, and UnitedHealth is preparing to sue them over this. Maybe, and the deal with LHC will not be missed.
But anyway it's good to see, that UnitedHealth is building its own "medical empire", not focusing on insurance alone. Think, that in the long term these investments will bring great benefits as UnitedHealth itself, and its shareholders. Of course, given that, what will they be allowed to do.
HP is now working from home: purchase of Plantronics
US provider of information technology products and services HP (NYSE: HPQ) buys IT company Poly, also known as Plantronics.
Here's what investors need to know:
- purchase amount of Poly - 3.3 billion, including debt;
- buy a company at a price 40 $ per share — with a premium of approximately 53% to the price of the company before the news;
- у Poly P / S about 1 and P / E under 30;
- acquire the company not at the price of its historical highs, even close to them.
Poly designs and manufactures headsets, audio- and video devices, what brings her 85,14% proceeds, as well as the provision of services in this area - 14,86% proceeds. I want to note, that the service segment will be more marginal than the goods segment: 65,9 And 41,3% gross margin as a percentage of segment revenue.
The bulk of the company's products and services are aimed at professionals.. The company makes most of its revenue outside the United States.. Business Poly stars from the sky is not enough, but generally stable.
It seems to me, HP deal looks very attractive: and in absolute, and in relative numbers money is spent very moderately. It is especially important to take into account, that the purchase of Poly is a bet on the development of the work-from-home industry, because the pandemic has become eternal, so this process is unstoppable.
But, certainly, this also brings problems for HP: a huge and very marginal part of its business is focused on servicing offices and the slow death of offices in the US and the world will negatively affect its reporting for a very long time. So this point should be kept in mind by HP shareholders.
In utilitarian terms, this deal will save HP 500 million by 2025. It's not the biggest money - less 20% from the average annual profit of HP. But, given the crisis of offices, buying Poly is the right decision.
Poly Case Shows, that the strategy of "find the fallen shares of a stable enterprise, which is relatively inexpensive in every sense: suddenly it will be bought by someone bigger as part of the restructuring and diversification” fully justifies itself.
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