Will This Acquisition Live Up to Expectations?

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Nielsen Holdings N.V. (NYSE: NLSN), a global information and measurement company, announced that it has signed an agreement that will see it acquiring Arbitron (NYSE: ARB), an international media and marketing research firm, for $1.26 billion. Nielsen is a leading company as far as marketing and consumer information, online intelligence, trade shows and media measurement is concerned. With its headquarters in New York and the Netherlands, the company maintains a strong presence in more than 100 countries around the world.

Arbitron on the other hand maintains a strong footing in electronic media, mobile and advertising, and is known for its core survey of the media, retail and product patterns in the U.S. It has made its mark in the development of application software which is designed for analysis of the media audience and marketing information data.

Nielsen signed an agreement to acquire all of Arbitron’s outstanding common stock at a premium of around 26% to the company’s (Arbitron) closing price on Dec. 17, which amounts to $48 per share in cash and has been unanimously approved by the boards of both Nielsen and Arbitron with the agreement subject to regulatory review and customary closing conditions. According to the CEO of Nielsen, David Calhoun,

“U.S.consumers spend almost 2 hours a day with radio. It is and will continue to be a vibrant and important advertising medium. Arbitron will help Nielsen better solve for unmeasured areas of media consumption, including streaming audio and out-of-home. The high level of engagement with radio and TV among rapidly growing multicultural audiences makes this central to Nielsens priorities.”

Steve Hasker, President of Nielsen’s Global Media Products and Advertiser Solutions said that

“With Arbitron assets, Nielsen intends to further expand its Watch segments audience measurement across screens and forms of listening. These integrated, innovative capabilities will enable broader measurement of consumer media behavior in more markets around the world. We will also bring local clients greater visibility to empower more precise advertising placement and campaign effectiveness.”

The President and CEO of Arbitron on his own part, enthused that the radio “Reaches more than 92 percent of all American teens and adults because they love to listen to music, talk, news and information while at home, at work and in their cars,” and as such, with the acquisition of Arbitron by Nielsen, with the acquiring company merging its global capabilities with the acquired company’s unrivaled radio measurement and listening information, both advertisers and media clients will gain deeper insights on “consumer behavior and the return on marketing investments.”

With the combined assets from the acquisition, the board of Nielsen believes that company’s already strong cash flow will be reinforced, propelling the company towards investing more in growth initiatives. The total revenue generated by the two companies is projected to be $6 billion while the combined pro forma adjusted EBITDA for 2012 is set at $1.7 billion. Nielsen estimates that the amount spent in the acquisition will be accretive to “EPS by $0.13 a year after the close and approximately, $0.19 after two years.” This is excluding the purchase accounting adjustments and estimated transaction costs. Also, the cost synergies in relation with this acquisition, which will to a larger extent be driven by the integration of technology platforms and efforts in data acquisition, is an estimated $20 million.

As for Nielsen believing that this acquisition will support cash flow, the next 12 months will prove them wrong or right. Time will tell for shareholders.

Chizy has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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