LONDON/FRANKFURT: Britain’s largest pay-TV company BSkyB is in talks to buy Sky Deutschland and Sky Italia, a €10bn deal that would realise Rupert Murdoch’s long-held ambition to combine his European TV interests in a single business.
The potential tie-up would create a broadcaster with 20 million subscribers and more clout to deal with growing competition from rivals such as BT in sport as well as online groups like Netflix in movies and blockbuster TV shows.
In 2010, Murdoch had already tried to take full control of BSkyB, the jewel in the crown of his European operations, but the bid was thwarted by repercussions of a phone hacking scandal involving his British tabloid News of the World in 2011.
Murdoch, whose 21st Century Fox is BSkyB’s biggest shareholder, has looked at various options over the years to consolidate his TV holdings in Europe.
The latest proposal would see BSkyB, 39 percent owned by 21st Century Fox, buy Sky Italia and Sky Deutschland, which are 100 percent and about 55 percent owned by Fox, respectively.
British regulators would likely want to examine any deal that would result in Murdoch increasing his overall stake in BSkyB. A source close to the talks said the current thinking was that Murdoch would not raise his stake in BSkyB above 39 percent.
BSkyB said talks were still preliminary and no agreement had been reached on terms, value or transaction structure.
“BSkyB believes at the right value, this combination would have the potential to create a world-class multinational pay TV group,” the group said in a statement yesterday.
21st Century Fox said the combination of the Sky-branded European satellite platforms in Britain, Germany and Italy had often been discussed internally.
“From time to time these conversations have included BSkyB, however no agreement between the parties has ever been reached,” it said.
BSkyB also said it was not prepared to overpay for Sky Deutschland, noting that any potential agreement would be subject to the Sky Deutschland share price “continuing to trade on an undisturbed basis.”
Reports have put the size of the deal at about €10bn ($13.8bn). Shares in Sky Deutschland were up 6.7 percent at €6.76, valuing the group at nearly €6bn.
Shares in BSkyB were down 2.6 percent by 1118 GMT, giving it a market capitalisation of $22.9bn.
The tie-up would put the group at the front of the pack if sports rights, which are sold country by country, were in future available on a pan-European basis.
The combined company would have 57 percent of its subscribers in Britain, 19 percent in Germany and 24 percent in Italy, analysts at Citi said. Britain would contribute 68 percent of revenue and 89 percent of group operating profit.
Analysts at Investec said such a deal looked sensible in terms of scale but Italia/Deutschland were in weaker competitive positions, with lower margins and returns, versus Sky. Reuters
