Sky seals $8bn European buy-out

UK satcaster BSkyB has completed the buy-out of its sister platforms in Italy and Germany from 21st Century Fox for just shy of £5bn (US$8.33bn).

Jeremy Darroch

The move, which sees BSkyB take complete control of Sky Italia and have a controlling 57.4% stake in Sky Deutschland, will make Sky the largest pay TV provider in the three markets.

Previous owner 21st Century Fox has netted £4.9bn and BSkyB’s 21% stake in National Geographic Channel, valued at £382m, potentially providing it with more funds to effect a takeover of US cable giant Time Warner.

The deal was first mooted in May and sees BSkyB paying £2.07bn in cash plus the Nat Geo stake for Sky Italia and £2.9bn for Sky Deutschland.

BSkyB, which is 39% owned by Fox, is now obliged to make an offer to the remaining minority shareholders in Sky Deutschland for their shares at €6.75 (US$9.09) apiece and must persuade its own investors that the deal is good value. Fox, as a related party to the deal, is not allowed to vote in this process.

BSkyB claims it will save around £200m by using its new position to benefit from expanded scale and combine operations across the three divisions in areas including content and technology, although details around this are yet to be finalised.

The enlarged multinational pay TV provider will serve an estimated 20 million subscribers and Sky is hoping the move will allow it to make further in-roads into the European pay market, which stands at more than 97 million households across the three countries.

Jeremy Darroch, BSkyB’s CEO, said the deal would create a “world-class, multinational pay TV business with enhanced headroom for growth and immediate benefits of scale.

“The three Sky businesses are leaders in their home markets and will be even stronger together. By creating the new Sky, we will be able to use our collective strengths and expertise to serve customers better, grow faster and enhance returns.”

If the deal gets regulatory approval, Sky said it expects to make savings in the areas of programme and rights acquisition as well as cutting commissioning costs, suggesting more shows will be ordered for all three territories.

The trio are already working together on 10-part crime series Diabolik, which follows a thief who changes his identity to evade capture. It is being produced at Cinecitta in Rome by prodco Cattleya and is the first project co-funded by the three pay TV platforms.

The company also recently took a majority stake in The Great British Bake Off producer Love Productions and is looking to further expand its international content business, having recently agreed a series of coproduction arrangements.

Confirmation of the deal comes as Rupert Murdoch’s 21st Century prepares an improved offer to buy out Time Warner for north of US$80bn, following its rejected bid earlier this month.

The firm is expected to use the funds gathered through the Sky deal, and the recent sale of its stake in ITV to cable giant Liberty Global, for a new improved offer.

The mega-deal would create an enormous media powerhouse made up of the Warner Bros and 20th Century Fox film studios as well as the respective companies’ TV networks, such as Fox, Fox News, FX, HBO, TNT, TBS and Cartoon Network.

21st Century is also in the midst of attempting to form a joint venture with Apollo Global Management that will bring Shine Group, Core Media Group and Endemol under one umbrella.

In related news, BSkyB revealed in its annual results released Friday that pre-tax profits had slipped by 5% to £1.26bn following investment in new content and more costly rights to the UK’s Premier League.

Revenues rose by 7% with the company adding that it had experienced demand “across the board” for its various offerings, citing Sky Sports as having its highest viewing share for seven years.

News of the Sky deal, and the results, saw BSkyB’s share price fall back by more than 3% in early trading.