ITVPF ITV Plc (PK)

(Rewrites, adds detail.)

By Simon Zekaria

LONDON--ITV PLC (ITV.LN), the U.K. over-the-air commercial broadcaster, Thursday said it has withdrawn its proposal to acquire film and television producer and distributor Entertainment One Ltd. (ETO.LN).

In a statement, ITV said it couldn't reach agreement over value with the Canadian group, even as ITV said it "continues to believe in the strategic logic and potential benefits" of the deal.

At 1128 GMT, shares in Entertainment One, which is listed in London, fell 14% to 215 pence, valuing it at 1.08 billion pounds ($1.43 billion). ITV shares rose 0.9% to 204 pence, valuing the company at GBP8.12 billion.

Earlier this month, Entertainment One, owner of children's cartoon series "Peppa Pig," rejected an offer from ITV worth $1.3 billion. It received an offer of 236 pence a share, but "rejected it on the basis that it fundamentally undervalues the company and its prospects."

A deal between the companies would have helped ITV diversify its business away from advertising revenue amid concerns of a slowdown in the U.K. as media operators cut spending to offset the economic fallout of Britain's vote to leave the European Union.

ITV said last month that it hadn't experienced a drop in advertising following the Brexit vote, but it still aimed to cut costs by GBP25 million across its operations, including possible job losses, in 2017, with ITV Chief Executive Adam Crozier citing "wider economic uncertainty."

In recent years, ITV has gone on a run of snapping up production companies across the world, including in the U.S., to boost the expanding production arm ITV Studios--its high-performing unit that is driving profits.

It also is eager to gain an edge in the U.K.'s competitive broadcasting market, which has been shaken up in recent years by telecommunications firms such as BT Group PLC (BT.A.LN) entering pay-television, as well as streaming platforms such Netflix Inc. (NFLX).

On Thursday, ITV said it remains on the lookout for deals.

"ITV has a clear strategy to build a stronger, more diversified international business and will continue its disciplined approach to evaluating its healthy pipeline of potential investment opportunities," it said.

Write to Simon Zekaria at simon.zekaria@wsj.com

(END) Dow Jones Newswires

August 25, 2016 07:59 ET (11:59 GMT)

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