Murdoch's BSkyB lines up €10bn of European tie-ups
Britain's largest pay-TV company BSkyB is in talks to buy Sky Deutschland and Sky Italia, a €10bn (£8bn) 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; however, the bid was thwarted by repercussions of a phone-hacking scandal involving his British tabloid News of the World.
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, 39pc owned by 21st Century Fox, buy Sky Italia and Sky Deutschland, which are 100pc and about 55pc owned by Fox, respectively.
British regulators would likely want to examine any deal that would result in Mr Murdoch increasing his overall stake in BSkyB. A source close to the talks said the current thinking was that Mr Murdoch would not raise his stake in BSkyB above 39pc.
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 that 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.
Media reports have put the size of the deal at an estimated €10bn.
Shares in Sky Deutschland were up 6.7pc at €6.76, valuing the group at nearly €6bn. Shares in BSkyB were down 2.6pc, giving it a market capitalisation of £13.6bn.
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 57pc of its subscribers in Britain, 19pc in Germany and 24pc in Italy, analysts at Citi said.
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.
Barriers to a deal include the fact that Sky Italia is yet to renew the Serie A soccer rights in Italy, which is a key part of its TV offering. (Reuters)