ITVPF ITV Plc (PK)

Canadian film and television producer and distributor Entertainment One Ltd. has rejected a takeover offer from U.K. broadcaster ITV PLC after the two sides couldn't agree on a price, according to a person familiar with the matter.

The deal collapse comes after ITV submitted a bid for Entertainment One in a transaction that would have helped ITV diversify its business away from advertising revenue as part of an effort to bolster its content library.

Entertainment One, best known for owning the rights to the cartoon character Peppa Pig, had a market capitalization of around £ 901.1 million ($1.2 billion) based on its closing price in London on Tuesday, and ITV's offer price was expected to exceed £ 1 billion, according to another person familiar with the talks. Both companies could confirm Entertainment One's rejection of ITV's offer as early as Wednesday.

Entertainment One is based in Canada, but listed on the London Stock Exchange.

The Financial Times first reported Entertainment One's plan to reject ITV's offer.

The attempted acquisition came amid concerns of a slowdown in television advertising in the U.K., as companies in that country face the potential need to cut spending as a way to offset the economic fallout of the Brexit vote.

Last month, ITV said that it generated net advertising revenue of £ 838 million for the first six months of the year, flat with the year-ago period as advertisers—around February, when the U.K. vote date was announced—started to pull back from business amid concerns over a slowdown in consumer spending. ITV's overall net profit fell to £ 243 million from £ 257 million.

Still, ITV's production arm showed strong growth, as year-over-year revenue increased by 31%. That gain highlights the broadcaster's interest in Entertainment One as part of its stated goal of building a "global production business of scale."

By acquiring Entertainment One, ITV would have gained access to an owner and distributor of 40,000 television and film titles, including Grey's Anatomy, through its stake in Mark Gordon Co., and the film release this year of "The BFG" in partnership with Amblin Partners. Entertainment One's content library also includes 4,500 hours of television programming and 45,000 music tracks, according to the company's website.

Although ITV indicated last month that it hadn't suffered a drop off in advertising following the Brexit vote, it still aims to cut costs by £ 25 million across its operations, including possible job losses in 2017 to offset the possibility of an economic slowdown in the U.K.

Earlier this month, the Bank of England cut its benchmark interest rate to historically low levels and announced a bond-buying program to prop up the country's economy.

Write to Ben Dummett at ben.dummett@wsj.com and Jacquie McNish at Jacquie.McNish@wsj.com

(END) Dow Jones Newswires

August 10, 2016 01:55 ET (05:55 GMT)

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