Is Ten Network Holdings Limited a takeover target?

Regulatory change could lead a wave of M&A activity in the media sector.

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What:  A recent article in The Australian Financial Review has drawn attention to alleged talks held between Ten Network Holdings Limited (ASX: TEN) and British television network ITV, a broadcaster and production house behind hit UK dramas such as Downton Abbey and Doc Martin.

So what: With speculation mounting that the Abbott-led Federal Government will look to ease regulations that currently prohibit merging metropolitan and regional broadcasters, media investors could be in for exciting times as the sector appears ripe for consolidation.

Now what: While Southern Cross Media Group Ltd (ASX: SXL) and Prime Media Group Limited (ASX: PRT) are almost certain to be involved in any television sector shake-up given their regional broadcasting assets, regulatory change could also be particularly helpful for the struggling Ten Network. As was explained here, there are plenty of reasons to be wary of Ten Network and its current lacklustre ratings. However under a takeover scenario, a suitor would almost certainly pay a premium for Ten’s assets.

Regulatory change will certainly fire up the media sector but if regulations don’t change then media stocks could continue to struggle. The safest course of action is for investors to take a wait-and-see approach.

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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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