BSkyB is to merge with sister companies Sky Italia and Sky Deutschland to create a pan-European broadcaster.
The new broadcaster, which will be known as Sky Europe, was made possible after BSkyB today confirmed a deal with 21st Century Fox to acquire 100% of Sky Italia and a controlling 57.4% stake in Sky Deutschland. Sky said that the new company, which brings together the leading pay TV businesses in three of Europe’s four biggest markets, would have a combined customer base of 20 million people and increase the Pay TV company’s revenues from BSkyB’s current £7.6 billion to £11.2 billion.
The deal, which is subject to regulatory and independent shareholder approval, is understand to be worth a total of around £4.9 billion. BSkyB is financing this mega merger, and in turn the creation of Sky Europe, by the creation of more than 156 million new shares and the use of new debt facilities and cash resources. 21st Century Fox has committed to buy enough of the new shares to maintain their current 39.14% stake in the satcaster.
In real terms, Fox will receive £2.07 billion in cash and Sky’s 21% stake in National Geographic Channels International, estimated to be worth £382 million, for Sky Italia; while the company stands to receive £2.9 billion for their 57.4% stake in Sky Deutschland, working out at €6.75 per share. In addition, BSkyB is offering a voluntary cash offer to Sky Deutschland’s minority shareholders at the same price per share. If the minority shareholders accept the offer, the total value of the deal could rise to £7 billion.
The creation of Sky Europe is expected to allow continued growth of the company’s Pay TV business across Europe. It is also expected to allow the company to take advantage of synergies between the UK and Italian business to find savings of more than £200 million in annual costs across commissioning, production of live events, back office IT systems, rationalisation of suppliers and, over time, in product and set top box development. Sky did, however, concede that is was unlikely to save costs when it came to acquired programming.
“This transaction will create a world-class, multinational pay TV business with enhanced headroom for growth and immediate benefits of scale”, said Jeremy Darroch, BSkyB’s Chief Executive. “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.”
While Nick Ferguson, Chairman of BSkyB, added: “The Independent Directors of BSkyB unanimously believe the strategic rationale for a combination with Sky Italia and Sky Deutschland is compelling. The agreed valuation represents an attractive financial opportunity that will deliver growth and value creation for all shareholders.”