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Investment idea - Nielsen

Nielsen, a leading global provider of information and insights into what consumers watch and buy, is close to the completion of its $1.26 bln acquisition of Arbitron that focuses on radio and out-of-home media audience measurements in the US. The deal was announced in December 2012 and has been under the antitrust review of the US Federal trade Commission (FTC). Nielsen said that it has agreed with FTC to extend the review period into September; according to the sources with the knowledge of the talks the negotiations are currently on the final stage. The company’s management is confident that it will have the permission of the FTC till the end of September.

The Arbitron purchase will allow Nielsen to considerably widen its covering of the US media landscape and thus increase the level of services to its customers. Nielsen expects the deal to add about 19 cents per share to earnings (around 10%) within two years after completion. In particular, the companies are looking to save at least $20 mln by merging their operations, mostly from combining technology systems and spending less to obtain data. When the permission is ultimately obtained it will be a significant catalyst for Nielsen’s share price, in our view.

Nielsen’s fundamental profile looks solid. The company’s 2Q13 financial report beat consensus on adj. EPS and also showed more notable than expected adj. EBITDA margin improvement. Management reaffirmed its full year guidance for 4-5% constant currency revenue growth and 40-60 bps adj. EBITDA margin expansion. The company also announced a 25% dividend growth in its quarterly dividend (to $0.2) and a new $500 mln share buyback program. Management noted that Nielsen would remain dividend-oriented.

We believe that Nielsen shares are attractive at the current price. Medium-term target price for the company’s stock is $38.