Arbitron shares inch up after downward slide

The spread on Nielsen Holding NV's $48 per share cash offer for Arbitron Inc. rebounded Tuesday following several days of widening caused by some investors' sudden realization that the deal is in for a long review before the Federal Trade Commission.

Arbitron shares closed at $46.69 on Tuesday, up 9 cents from their opening price and 13 cents higher than Monday afternoon's low of $46.56. Arbitron's shares have been steadily declining since the second week of March, when it dropped from just over $47 after the FTC issued a second request extending its review of the deal.

Despite the thorough antitrust investigation, few antitrust lawyers predict that the deal will ultimately face trouble from the commission. The main area of concern -- new audience measuring technology both companies are developing for multiple digital platforms, including smartphones, tablets and other mobile devices -- are still in their nascent stages and the FTC would have a hard time convincing a court that there's a concrete market being harmed by merging the companies.

Fueled in part by optimistic comments from Nielsen CEO David Calhoun when the deal was announced in December, some investors may have expected a quick review for the transaction.

However, from the beginning a deal combining companies that monopolize their individual sectors of broadcast ratings was destined for a lengthy antitrust review. Details from the companies' merger agreement and other filings with the Securities and Exchange Commission indicate the companies fully expected a long examination.

The agreement obligates Nielsen to pay Arbitron a relatively high breakup fee -- 10% of the $1.26 billion purchase price -- if the deal fails to win regulatory approval, an indication the target believes there are antitrust concerns.

Dominance over traditional broadcast ratings -- Nielsen in television and Arbitron in radio -- would give a joined Nielsen-Arbitron a big leg up over other nascent competitors trying to break into digital ratings services. But there are several players attempting to come up with measurement technology that advertisers will find suitable.

In its most recent annual report filed with the SEC, Arbitron listed Nielsen subsidiary Telephia among several companies vying to compete with Arbitron Mobile's mobile audience services. Others include Anite plc, Ascom Holding AG, Carrier IQ Inc., comScore Inc., Experian Information Solutions Inc., Lumi Technologies Ltd., M:Metrics Inc., Médiamétrie plc, Nokia Siemens Networks, Nurago GmbH and Spirent Communications plc.

Nielsen and Arbitron had extensive discussions about the antitrust risks before agreeing to the deal and Arbitron ultimately won the promise of a $131 million antitrust breakup fee. In return, Nielsen insisted on provisions that would limit the extent of any antitrust conditions it would be obligated to accept.

Despite Nielsen's apparent resistance to a significant divestiture, one arb said Tuesday that the market apparently took comfort in Nielsen's announcement that it is testing a product to measure online viewing of TV shows on sites such as Hulu, YouTube, Yahoo! and AOL. The product announcement shows that Nielsen has a product in its digital ratings stable that it could divest if the FTC insisted.

Antitrust attorneys, however, say such drastic action by the FTC would face a severe courtroom test if Nielsen refused to settle and forced the FTC to take a merger challenge to court.

One of the toughest tasks facing antitrust regulators is convincing a judge to block a deal because it might harm potential competition.

The government has a low success rate with such cases and the regulators' horizontal merger guidelines don't offer much guidance on the issues raised by potential competition cases, which include how the government should calculate a potential competitor's likely market share.