Tuesday, 29 July 2014 00:01
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Reuters: Britain’s BSkyB has agreed to pay $9 billion to buy the Rupert Murdoch’s pay-TV companies in Germany and Italy, taking its hunt for growth into Europe by creating a media powerhouse with 20 million customers.
Under the deal, BSkyB will pay Murdoch’s 21st Century Fox for the pay-TV companies using cash, debt, its stake in a TV channel and a placing of shares that represents around 10% of its issued share capital. Murdoch is also the largest shareholder of BSkyB.
The deal, which will make BSkyB the leading pay-TV provider in Europe, adds to a flurry of consolidation in the global media sector as traditional entertainment companies seek to bulk up to compete against more nimble Internet rivals.
Fox is expected to use the proceeds to fuel its pursuit of Time Warner, which recently rejected a bid by Fox of $80 billion.
BSkyB had flagged a possible deal for Sky Deutschland and Sky Italia in May. The price announced on Friday was slightly lower than expected by some analysts and the cost and revenue benefits higher.
But BSkyB’s shares fell 5%, pulled lower by the plan to issue stock and suspend a share buy-back.
“It is a bit of a step in the unknown for Sky,” said Conor O’Shea, an analyst at Kepler Capital Markets. “For the first time, it will go from UK-focused to European and be asked to prove that it can add value from being larger.”
O’Shea has a “buy” rating on BSkyB shares.
Facing the toughest market conditions in its 25-year history, BSkyB has decided its future growth lies in creating a European pay-TV leader that will operate in Britain, Ireland, Germany, Austria and Italy.
BSkyB dominates British pay-TV, offering its premium sports, movies and U.S. drama programming to more than 10 million homes. Of 97 million households in the five countries it wants to target, 66 million are yet to take pay-TV.
“Sky is clearly taking the strategic view that pay TV, already ingrained in the U.S. culture, will become prevalent in Europe,” said Richard Hunter, head of equities at Hargreaves Lansdown.
Fox owns 100% of Sky Italia, 57% of Sky Deutschland and 39% of BSkyB. BSkyB will pay 2.45 billion pounds ($4.2 billion) for Sky Italia and 2.9 billion pounds for Fox’s 57% stake in Sky Deutschland.
