Analysts up Nielsen rating as Elliott takes activist stake, plans push for sale
After jumping yesterday after Elliott Management disclosed an 8.4% stake in the company, shares of Nielsen (NLSN) are again on the rise this morning as Wall Street digests the announcement and two Wall Street firms upgraded the stock. Macquarie analyst Tim Nollen raised Nielsen's rating to Outperform, saying the activist stake raises the possibility of a sale, while his peer at Barclays upgraded the shares to Equal Weight as he now sees limited downside in the stock and possible deal scenarios. ACTIVIST STAKE: Yesterday, Elliott Asset Management disclosed an 8.4% stake in Nielsen in a filing with the SEC that allows for activism. Elliott collectively has beneficial ownership of 18M shares of common stock constituting approximately 5.1% of the shares outstanding and combined economic exposure in Nielsen equivalent to 30M shares, constituting approximately 8.4% of the shares outstanding. Elliott will encourage Nielsen to "undertake a full strategic review of, and initiate a process to explore, the sale" of the company in full, in addition to the exploration of the sale of certain of its businesses or assets, including transactions in which the fund "may seek to participate and potentially engage in, as a purchaser or investor." MACQUARIE, BARCLAYS UPGRADE NIELSEN: In a research note to investors this morning, Macquarie's Nollen upgraded Nielsen to Outperform from Neutral and raised his price target on the shares to $34 from $28. The analyst argued that Elliott Management's 8.4% stake in Nielsen will result in either a sale of the entire company, splitting it in two, or selling the Buy division and keeping Watch as a public company. Given the early retirement of CEO Mitch Barns at the end of the year, a rapid sale process could ensure with private equity firms likely leading the way, he contended. While his peer at Barclays thinks Nielsen's prospects as a standalone public company "remain grim," analyst Manav Patnaik upgraded the stock to Equal Weight from Underweight given limited downside now that Elliott Management has acquired an 8.4% stake and is pushing for a sale of the entire company. The analyst also raised his price target on the shares to $27 from $21, assuming a 60% likelihood of outright sale for $32 per share, with lower scenarios for just a Buy sale. STRATEGIC REVIEW COULD CONCLUDE IN NEXT 3 MONTHS: Commenting on the news, Morgan Stanley analyst Toni Kaplan told investors that she believes Nielsen could conclude its planned strategic review with a sale of the Buy business or a sale of the whole company, and that timing of the decision could take place over the next three months. Given the results that have been found in other strategic review processes as well as recent activist activity, no sale at all is potentially the least likely outcome, she contended. The analyst reiterated an Overweight rating and $26 price target on the shares. Meanwhile, Jefferies analyst Surinder Thind argued in a research note of his own that even following yesterday's 12% rally, there is "significant shareholder value to be unlocked" at Nielsen. The analyst noted that he believes Nielsen's Watch segment could be worth more than all of the company currently, estimating a value of $29-$33 per share. Overall, Thind's "rough math" suggests a buyout for the entire company could be worth $30 per share. He reiterated a Buy rating and $29 price target on the shares. Also keeping an Outperform rating on Nielsen's shares, Baird analyst Jeffrey Meuler raised his price target on the stock to $30 from $26 following the announcement. The analyst sees multiple avenue to unlock value including the company's Watch and Buy segments, which could be of interest of private equity. Additionally, Meuler pointed out he sees the potential for expense reduction and a more broad and urgent strategic review. PRICE ACTION: In morning trading, shares of Nielsen have gained about 6.1% to $26.12.