Tightly Held Nielson Holdings Moves Up On Sale Talk
Neilson Holdings (NYSE: NLSN) got a big boost in March when it announced it was considering offers from a number of private equity firms. So far, no deals have been signed but there is a major shareholder betting big on the outcome. Windacre Partnership, LLC, broke a 2-year dry spell for insiders and major shareholders making 3 transactions, all purchases, in the first and second week of the 2nd quarter, 2022. These purchases totaled more than 91 million shares and bring Windacre Partnership’s holdings to over 25% of the company. The insiders, in general, don’t own a lot of the stock at only 0.5% of the shares outstanding but the institutions do.
Institutional ownership, including Windacre Partnership, tops the 99.0% mark and they have been net buyers for the last 4 quarters. The buying activity is worth about $.53 billion of the current market cap or about 5% of the market cap over the past year and is a substantial figure considering how tightly held the stock is. What this means, ultimately, is a number of shares have been sold short on the market, about 12.15% of the float to be exact, and that has the stock set up to move even higher when the next positive catalyst emerges, and that could be very soon if Windacre gets its way.
Nielsen has received a $28 per share offer from a P/E consortium the company views as favorable. The problem is Windacre Capital, the largest shareholder by far, opposes the deal and is upping its holdings in an effort to block the deal. This means a fight is brewing and it is one in which volatility is assured and higher shares prices are a possibility. As far as Windacre goes, they believe the stock is worth in excess of $40 and we think they may be right.
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The Analysts Are Holding Nielson Holdings plc
The analyst's activity in Nielson Holdings has been mixed this year but the consensus rating is a firm Hold. The latest activity came out in the wake of the merger talks and includes one upgrade to buy from hold, one downgrade to Hold, and one reiterated Buy equivalent, and all three raised their price target to the now-current $28 bid for the company. This compares to the consensus target of $25.80 and the high price target of $33 that was set by BMO in the middle of 2022.
As for the valuation, the stock is trading at only 14.5X its earnings which is low compared to the broad market and other high-quality dividend growers that we follow. The dividend is very low at only 0.8% of the earnings outlook but there are two things to consider. The first is the dividend was cut dramatically in the wake of the pandemic to preserve capital and has never been returned to its pre-pandemic level. The second is the payout ratio is sub-15% and the balance sheet is strong so there is no reason not to expect the dividend to be returned to its previous levels sometime soonish. In that scenario, the company would issue an increase in the payout of $0.20 per quarter, or almost 500% of the current payout.
The Technical Outlook: Nielsen Consolidates, Market Waits For News
Price action in Nielson surged in the wake of the merger talk and quickly hit the initial $25.50 offer point. Price action has since moved up from that level to hit $28 where it is now consolidating. This move could turn into a rally or a rout, depending on the news, but we favor a rally in light of Windacre’s support and the outlook for the dividend. If, however, the deal falls apart the price action could quickly crumble under the pressure of short-selling. Windacre Partnership may be willing to bet big on this outcome, but we aren’t.
Companies in This Article:
| Company | Current Price | Price Change | Dividend Yield | P/E Ratio | Consensus Rating | Consensus Price Target |
|---|
| Nielsen (NLSN) | $27.98 | flat | 0.86% | 19.03 | N/A | N/A |
Experience
Thomas Hughes has been a contributing writer for InsiderTrades.com since 2019.
Areas of Expertise
Technical analysis, the S&P 500; retail, consumer, consumer staples, dividends, high-yield, small caps, technology, economic data, oil, cryptocurrencies
Education
Associate of Arts in Culinary Technology
Past Experience
Market watcher, trader and investor for numerous websites. Founded Passive Market Intelligence LLC to provide market research insights.
