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01:38AM (15 mins delay)
Sep 18, 2009 - 1:56 AM EDT
Steve Birenberg submits:Media stocks continue to be market leaders in the latest phase of the stock market rally. The market rally is based on improved sentiment and data toward a global economic recovery. Most revenue drivers for media companies are highly sensitive to economic growth so it is not surprising that media stocks are among the sectors leading the rally. However, I think another is at work. After a multi-year lull, mergers and acquisitions have returned to the forefront of media company strategic planning.
Until this decade, media companies were very acquisitive providing strong support for media stock prices. The AOL-Time Warner (TWX) merger represented the peak and quickly went wrong putting an end to media M&A except for divestitures. The recession, the collapse of credit markets in 2008, and accelerating secular challenges completely took takeover activity off the table. Now it appears that activity is picking up. In the past, media properties always were sold at a premium to their public market values because they were trophies and often produced good cash flow. Renewed acquisition activity now supports higher valuations for media properties which still trade at a discount to private market value.
Source: Seeking Alpha (Sep 18, 2009 - 1:56 AM EDT)
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