Deutsche Bank Comments On Arbitron, Pending Merger

Key takeaways are that the industry has increased confidence in the PPM and Arbitron (NYSE: ARB) as the currency, and any negative impact from the merger is likely to be modest. Deutsche Bank maintains its Buy rating on ARB as we see double-digit EPS growth in 2011/12 and strong acceleration of cash flows from depressed levels now that the PPM roll-out is complete and the radio ad market and economy are recovering.

MRC accreditation of 11 additional PPM markets is further evidence of a successful transition to electronic measurement in terrestrial radio, and demonstrates increased industry confidence in the currency. Additionally, the recent client-only “PPM Update” call revealed that PPM improvement initiatives are on track, with substantially all sample quality metrics meeting or exceeding their benchmarks.

The pending Citadel/Cumulus merger has surfaced investor questions on the potential impact to Arbitron. From DB's perspective, there are two sides to this coin. On the one hand, a healthier customer is undoubtedly a good thing for Arbitron. However, a bigger customer is likely a tougher negotiator. Deutsche Bank sees at least five potential outcomes, some involving a reduction in total contract value and others no negative impact.

Deutsche Bank has a $45 PT and Buy rating on ARB

ARB closed Wednesday at $39.44