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ITV primed for takeover

TIP UPDATE: ITV looks a better acquisition target after de-risking its balance sheet
August 24, 2011

ITV has hedged additional liabilities in its defined benefit pension scheme through a 'longevity swap' with investment bank Credit Suisse. In the process, it has bolstered its balance sheet and made the group a better acquisition target.

IC TIP: Buy at 56p

Under the swap, ITV will pay the bank a fixed, though unspecified, sum and Credit Suisse will guarantee to cover any increase in liabilities if the pension scheme's 12,000 members live longer than expected.

The deal adds £50m to the pension fund's £312m deficit, roughly equivalent to an extra year of longevity, and cancels the benefit that ITV got by extending an arrangement that sees revenues from a subsidiary paid into the scheme.

What we said: Buy

When: 22 January 2010

Price then: 58p

Price now: 56p

Change: -3%