BSkyB to pay $9 billion to create Sky Europe

Fri Jul 25, 2014 4:47pm EDT
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By Kate Holton and Leila Abboud

LONDON/PARIS (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 percent 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 percent, 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.   Continued...

Sky Sports logos are seen on the side of offices at their UK company headquarters in west London July 25, 2014. Britain's BSkyB has agreed to pay 4.9 billion pounds ($8.3 billion) in cash to buy Rupert Murdoch's pay-TV assets in Germany and Italy, responding to slowing growth at home by creating a European media powerhouse. REUTERS/Toby Melville