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Liberty buys $824m ITV stake

US cable giant Liberty Global has acquired satcaster BSkyB’s 6.4% stake in UK commercial terrestrial broadcaster ITV for £481m (US$824m).

Liberty Global is buying the shares currently held by BSkyB and in a statement to the London stock market this morning said it would fund the move through a loan that would be secured against ITV shares and existing liquidity.

Liberty does not currently intend to make an offer to acquire ITV outright, the statement continued, however, under the terms of the UK Takeover Code, the company said it reserves the right to announce such an offer within the next six months.

Financial adviser Investec said that although Liberty Global has said it does not intend to make an offer to acquire ITV speculation about a buy out is inevitable.

In a statement, Investec analysts said: “The key question is whether this implies a 100% Liberty Media acquisition of ITV in time – is it happy at just 6.4%? Given recent Liberty Global’s M&A appetite, we see speculation of further M&A as almost inevitable mid-term, implying ITV shares are likely to be valued more on a takeover basis.

“We would not value ITV network revenues at a high multiple given online threats, but we are far more sanguine on the mid-term prospects than previously and we see ITV having strategic value in UK commercial TV. ITV Studios also has good value potentially, given the US Time Warner, Fox News developments.”

It’s the latest move into the UK market by John Malone’s Liberty, which acquired Virgin Media, the second largest pay TV operator in the country behind BSkyB, for US$23.3bn in February 2013.

Then in May this year, Liberty joined forces with US factual giant Discovery Communications to take over London-based producer and distributor All3Media in a 50/50 joint venture costing £550m.

Liberty and Discovery each contributed £90m in cash with the rest of the deal funded through a combination of equity and non-recourse credit facilities raised at All3Media.

Liberty also agreed to buy Dutch cable TV company Ziggo in a deal that valued the company at €10bn (US$13.7bn) this January. Liberty, which already operates cable TV firm UPC Netherlands, had previously been Ziggo’s largest shareholder with a 28.5% stake in the firm.

However, Liberty Global lost out in its bid for Germany’s largest cable operator, Kabel Deutschland, to Vodafone, which paid €7.7bn for the company and sold its Chellomedia content business to US-based AMC for US$1bn last October.

This month analyst UBS suggested the sale of Sky’s stake in ITV would free up the company to acquire Sky Italia and Sky Deutschland from Rupert Murdoch’s 21st Century Fox, allowing it to create Sky Europe.

Mike Fries, Liberty Global’s CEO, said: “This is an opportunistic and attractive investment for us in our largest cable market. ITV is the leading commercial broadcaster in the UK and we’re excited to be shareholders.”

Paolo Pescatore, director for apps ad media at analyst CCS Insight, said: “This morning’s deal between Liberty Global and BSkyB is yet another key sign that the pay TV provider is raising funds to expand into Europe and strengthens recent speculation that BSkyB is in talks with its German and Italian counterparts to create a European empire.

“However, this is an equally good move for Liberty Global, whose recent deal with All3Media sent strong signals from the cable company and a recognition that to compete it cannot rely on just connectivity alone.”

No regulatory approvals are required for an investment of this scale.

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