Sky counts cost of £940m ITV gamble
SATELLITE broadcaster BSkyB was last night counting the cost of its controversial purchase of a £940million stake in ITV after being ordered to sell most of the shares.
The company, controlled by Rupert Murdoch’s News Corp empire, is considering whether to appeal against the Government order but legal experts have warned the chance of success is slim.
In a move that backed the findings of a Competition Commission investigation, the Secretary of State for Business and Enterprise, John Hutton, said the company should reduce its stake from 17.9 per cent to less than 7.5 per cent because the holding was against the public interest.
A deadline for the sale has not been made public but the City expects it to be within nine months.
Sky, where James Murdoch recently succeeded his father as chairman, paid 135p a share in November 2006. It timed the deal to scupper a planned bid for ITV by Sir Richard Branson’s Virgin Group.
But ITV’s shares nosedived, prompting Sky to book a £343million loss against the purchase as an exceptional item in its full-year results for 2007, based on the ITV price at the end of December. Further share price falls since then have taken the total loss on the holding to £430million.
ITV shares closed 1dp higher at 73dp on relief that BSkyB wasn’t being ordered to dispose of its shares quickly. BSkyB rose 18dp to 549dp.
Sky has four weeks to appeal but some analysts think it could also lodge a claim for damages because the shareholding was in line with the 20 per cent limit allowed under the Communications Act.
In a statement Sky said: “The company will give careful consideration to the announcement and confirm any further steps in due course.”
ITV warmly welcomed the decision, adding: “We believe this decision is in the best interests of the overwhelming majority of our shareholders.”
Virgin Media’s acting chief executive Neil Berkett said it showed the acquisition was anti-competitive and against the public interest. Analysts think Virgin is unlikely to make another bid approach for ITV.
Competition lawyer Anthony Woolich at law firm LG, warned an appeal would be “very difficult” and hinged on whether the 17.9 per cent stake gave Sky a “material influence” over ITV.
