Nielsen Hldg NV (NLSN), ONEX Corporation (OCX): What Does the Business Unit Sale Mean for the Big Merger?

In the call that announced and explained the divestiture of Nielsen Expositions, the company’s CFO argued that Onex’s cash infusion might also permit Nielsen to begin returning capital to its shareholders on a regular basis. Although he gave no firm timetable for this capital return, he implied that the company could increase its dividends or launch share buybacks during the coming months and years.

Where’s the Profit?

Now that Arbitron’s shareholders have approved the merger with Nielsen Hldg NV (NYSE:NLSN), it seems far more likely that it will go through as currently planned. To review, the terms of the all-cash deal require Nielsen to provide Arbitron’s shareholders with payments of $48 per share. Relative to Arbitron’s current share price of just under $47, this represents a premium of around 2%. As such, cautious investors who wish to lock in a small but real arbitrage profit should not be timid about initiating long positions in Arbitron.

On the other hand, those who wish to profit on a longer-term basis may wish to open a long position in Nielsen. As the company’s CFO noted in the Exposition call, neither deal is likely to have a significant negative impact on Nielsen’s earnings. Once the company digests the financial impact of the transactions, its stock price could continue to appreciate nicely.

In sum, the sale of Nielsen Expositions to ONEX Corporation (TSE:OCX) provides Nielsen Holdings with much-needed cash and increases the likelihood that its Arbitron purchase will go through. If these pieces fall into place, investors can profit from the deals by taking long positions in Nielsen or Arbitron. Given the long-term growth in the two companies’ core areas of operation, these transactions could prove to be quite lucrative.

The article What Does the Business Unit Sale Mean for the Big Merger? originally appeared on Fool.com and is written by Mike Thiessen.

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