Investors Like Nielsen's Q3 Results and the Sale of More Than Half the Company

Nielsen Holdings PLC (NYSE: NLSN) reported third-quarter 2020 results before markets opened Monday. The data analytics firm posted adjusted earnings per share (EPS) of $0.43 on revenues of $1.56 billion. In the same period a year ago, the company reported a loss per share of $0.51 on revenues of $1.62 billion. Third-quarter results also compare to the consensus estimates for EPS of $0.40 and $1.52 billion in revenues.

Perhaps the bigger story broke Sunday when the company announced the sale of its Global Connect business to affiliates of private equity firm Advent International and others for $2.7 billion. The sale price represents about 56% of Nielsen’s market cap as of Friday’s close.

The deal was forced after Elliott Management acquired a 4.6% stake in the company. The activist firm, led by Paul Singer, was not satisfied with Nielsen’s plan to spin-off Global Connect’s consumer data segment. As Nielsen CEO David Kenny noted, “The sale of this business to Advent will deliver substantial value sooner than was anticipated through the planned spin-off and creates certainty for all stakeholders.”

Third-quarter revenue dropped by 3.3%, with Nielsen’s Global Media segment reporting a decline of 3.9% to $836 million and Global Connect reporting a fall of 2.5% to $727 million. In the third quarter of last year, Nielsen wrote down $1 billion in goodwill related to the Global Connect business.

For the full year, Nielsen has made some changes to its guidance. The company has raised the lower end of its adjusted EBITDA margin guidance by half a point to a new range of 29.5% to 30%. Adjusted EBITDA guidance was lifted from a prior range of $1.80 billion to $1.86 billion to a new range of $1.85 to $1.88 billion. Full-year adjusted EPS guidance was raised from $1.50 to $1.62 to a new range of $1.54 to $1.62, and free cash flow is now expected to total $530 million to $550 million. Total revenue for the year is expected to decline by 2% to 4% on a constant currency basis.

James Peck, former CEO of credit reporting firm TransUnion, is Advent’s partner in the acquisition of the Global Connect business. He commented, “Nielsen Global Connect is the gold standard in retail measurement, with exceptional insights and unrivaled scale and coverage of the global CPG and retail markets.” Peck will “be involved in the day-to-day strategic and operational activities of the company,” but current CEO David Rawlinson will remain as CEO of what will become a privately held firm. The transaction is expected to close in the second quarter of 2021, and the new firm plans to change its name to NielsenIQ early next year.

Nielsen expects to use the proceeds of the sale to reduce its net debt of $7.76 billion. The company expects 2020 year-end net leverage to drop from 4.28% currently to around 4%.

Investors appear to be more than satisfied both with the sale of the Global Connect segment and the quarterly results. Shares rose by nearly 10% at one point in Monday’s premarket trading and were last seen up about 7.3% at $14.49, in a 52-week range of $11.62 to $22.33. The price target on the stock is $17.70, and Nielsen pays a dividend yield of 1.78%.

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