BSkyB in Talks to Buy Fox Pay
Rupert Murdoch is pursuing a deal that would transform British Sky Broadcasting Group Plc (BSY) into a European satellite-TV giant while also leaving his U.S.-based 21st Century Fox Inc. (FOX) focused on entertainment programming.
BSkyB, 39 percent owned by Fox, said today it's in talks to buy the Italian and German pay-TV assets of Fox. Such a deal, for control of satellite carriers Sky Italia and Sky Deutschland AG (SKYD), would be valued at about 10 billion euros ($14 billion), people with knowledge of the matter told Bloomberg News, which reported the talks on May 9. Fox has about 57 percent of Sky Deutschland and 100 percent of Sky Italia.
A deal would give BSkyB, already the biggest pay-TV provider in the U.K., oversight of companies that sell satellite programming to 8.5 million homes across Germany and Italy. By shedding the pay-TV units, Fox would be left with cable and broadcast networks plus movie and TV studios, making it more attractive to investors who want to bet solely on video production -- not distribution.
'This combination would have the potential to create a world-class multinational pay-TV group,' Isleworth, England-based BSkyB said in a statement.
Sky Deutschland shares jumped as much as 7.8 percent and added 7.3 percent to 6.80 euros at 9:18 a.m. in Frankfurt. They had fallen 21 percent this year through May 9. BSkyB fell 2.4 percent to 869 pence in London, giving the company a market value of 13.6 billion pounds ($23 billion).
'Internal Discussions'
The talks haven't progressed beyond a preliminary stage, no agreement has been reached on terms, value or transaction structure and there is no certainty that a deal will occur, BSkyB said.
'Over the years we've had numerous internal discussions regarding the organizational and ownership structure of the European Sky-branded satellite platforms,' New York-based Fox said in a separate statement. 'From time to time these conversations have included BSkyB, however no agreement between the parties has ever been reached.'
The companies have been in talks for months, and a deal could be announced this summer, said the people familiar with the matter, who asked not to be identified because the discussions are private.
Murdoch's Fox had previously sought to take full control of BSkyB. Fox was forced to abandon its pursuit of full ownership of the company in 2011 amid political opposition after allegations that journalists at U.K. newspapers Murdoch controlled had hacked into celebrities' phones and bribed police.
German Buyout
Fox's Sky Deutschland stake is valued at 3 billion euros at market price, and the Sky Italia holding is valued at about 5 billion euros, the people familiar with the matter said. BSkyB plans to offer a premium that could take the sale value to 10 billion euros, they said.
In Germany, a successful acquisition of Fox's stake in Sky Deutschland would force BSkyB to make a takeover offer to the public minority of the German company. BSkyB said it would make the bid without a premium.
The U.K. broadcaster had 15 million customers at the end of March, up 2.7 percent from a year earlier. Sky Deutschland had 3.73 million subscribers, while Sky Italia had 4.75 million. In Germany and the U.K., cable operators owned by billionaire John Malone 's Liberty Global Plc are the closest competitors for pay-TV users, according to Bloomberg Industries.
Soccer Rights
BSkyB's nine-month sales rose 6.6 percent to 5.67 billion pounds, as the company signed up more customers for TV products. Its shares are down about 8 percent from a 12-year high reached in October, before former phone company BT Group Plc agreed to spend $1.4 billion to shut Sky out of the UEFA 's Champions League and Europa League soccer games.
'Many investors own Sky for either cash returns or for a possible bid, not for Sky buying expensive European pay-TV assets,' Bank of America Merrill Lynch analyst Daniel Kerven wrote in a note. 'A possible deal makes sense for Fox but not BSkyB minorities.'
Assuming Fox maintains its 39 percent BSkyB stake, the potential deal would be 'an opportunity for Fox to reduce its net exposure to incumbent pay-TV, which is losing value to new competition, content, connectively & the consumer,' he wrote.
Fox gets about one-fifth of its revenue from its satellite investments, with the rest coming from its cable and broadcast networks and its film and TV studios.
Company Split
Fox itself is the result of a move last year by Murdoch to separate disparate businesses. The company was made independent by cleaving off News Corp.'s entertainment assets from its newspaper and publishing businesses.
While Murdoch agreed to split up News Corp. only after pressure from shareholders following the U.K. newspaper scandal, executives had signaled for years that they wanted to combine the satellite investments.
'We've made no secret of our belief over the years that we think the Skys are strong together,' James Murdoch, Rupert's youngest son and Fox's co-chief operating officer, said on a May 7 conference call. 'Currently our focus is on operating each of those businesses as best we can.'
To contact the reporters on this story: Ruth David in London at rdavid9@bloomberg.net; Aaron Kirchfeld in London at akirchfeld@bloomberg.net; Kristen Schweizer in London at kschweizer1@bloomberg.net
To contact the editors responsible for this story: Kenneth Wong at kwong11@bloomberg.net Ville Heiskanen
Post a Comment for "BSkyB in Talks to Buy Fox Pay"