• by Joe Mandese  @mp_joemandese, October 1, 2004

Global marketing and media research juggernaut VNU is in the market to make a major investment in the marketing or media research sector and some analysts believe portable people meter developer Arbitron, or maybe even magazine audience researcher Mediamark Research Inc., are likely targets in the United States.

The speculation follows VNU's sale of its European directories business, which raised about $2.5 billion in proceeds, about half of which VNU has indicated it plans to use as part of an acquisitions war chest to beef up either its marketing or media research operations. Netherlands-based VNU, which owns both media research giant Nielsen Media Research and marketing researcher ACNielsen, already controls more than 40 percent of the worldwide marketing and media research marketplace and is growing fast. In the U.S., where its Nielsen unit operates as a virtual monopoly, VNU controls an 86 percent share of the media measurement marketplace, according to an analysis released today by the equities research team at Merrill Lynch.

VNU has freed up $2.565 billion from the sale of its directories business, a divestiture that the Merrill Lynch analysts said would be highly "dilutive" to VNU's earnings if they are not reinvested, or used to repurchase VNU shares. The company has already indicated to utilize about half those proceeds and the Merrill Lynch teams described Arbitron as "an interesting potential target," which would be "complimentary" to Nielsen Media Research's activities."

In fact, Nielsen and Arbitron have been exploring the development of a joint venture that would measure both radio and television and potentially other media via Arbitron's new portable people meter technology, which Nielsen retains an exclusive option on. As MediaDailyNews has already reported, Nielsen and Arbitron executives have already devised an aggressive rollout scenario to deploy the PPMs in markets 11 through 60 contingent on successful results of a test being rolled out in Houston and sufficient "market support." Nielsen executives maintain a significant amount of testing and validation needs to be completed before that option can be triggered.

Meanwhile, on Wednesday, VNU announced a potentially even bigger deal with Arbitron to develop a new national marketing panel that would measure both media exposure and product sales via a so-called "single-source" measurement system based on the PPMs.

Interestingly, VNU shares have dipped slightly following that announcement, while Arbitron's have risen modestly. Merrill Lynch estimated that Arbitron has a current market capitalization of $1.1 billion, with relatively little debt, but noted that a take-out offer of the publicly traded radio researcher "could exceed VNU's allocated war chest."

Another potential acquisition target in the U.S. media research field is deemed to be MRI, a unit of United Business Media, which controls the marketplace for magazine audience measurement in the U.S. The analysts estimated that MRI has annual revenues of $55 million and margins of more than 30 percent.

Outside the U.S., the analysts speculated that Germany's Gfk (estimated acquisition cost: $923 million), the U.K.'s Taylor Nelson Sofres ($2.3 billion), and Europe's IPSOS ($867 million) are the most likely targets. Both TNS and Gfk are major provides of TV ratings research outside the U.S., which Merrill Lynch noted would make a good fit and would extend Nielsen Media Research's TV ratings dominance outside the U.S.

Recently, Nielsen has sought to extend its stranglehold on the TV ratings business by forming alliances and joint ventures with players outside the U.S., including Canada's BBM and WPP's AGB Group in Europe.