UK satellite broadcaster BSkyB has finally reached an agreement with cable operator Virgin Media to buy the latter’s channel portfolio, VMtv, for approximately £160m.
Under the terms of the transaction, Sky will pay Virgin an initial consideration of…
UK satellite broadcaster BSkyB has finally reached an agreement with cable operator Virgin Media to buy the latter’s channel portfolio, VMtv, for approximately £160m.
Under the terms of the transaction, Sky will pay Virgin an initial consideration of £105m in cash, with the remainder paid following the regulatory process. Sky will then assume responsibility for selling advertising for the newly acquired VMtv channels, which include Virgin1, Living, Bravo and Challenge, from January 2011. Sky will not license the Virgin brand and will announce the new channel brand for Virgin1 in due course.
The sale process of VMtv has been ongoing for more than a year and throughout that time Sky has always been seen as the frontrunner. Rival bidders Channel 4, NBC Universal, RTL and Time Warner have all dropped out along the way, unable to match BSkyB’s offer. UBS has been advising VMtv on the sale of its channels.
Jeremy Darroch, CEO of Sky said: “VMtv is an attractive investment opportunity which complements our existing content business and delivers strategic and financial benefits. We are pleased that, through commercial negotiation, we have been able to ensure wide distribution of our channels to a growing pay TV universe.”
In parallel to the acquisition, Sky and Virgin have entered into a number of agreements providing for the carriage of certain Sky standard and high-definition channels. The two companies have been negotiating the carriage fee for some time with the recent decision by Ofcom to cut the basic wholesale price at which BSkyB can sell its Sky Sports 1 and 2 channels shifting the balance of negotiations.
Under the new agreement, Virgin has secured wholesale distribution of Sky’s basic channel line-up, including Sky1 and Sky Arts, and the newly acquired VMtv channels. In addition, for an incremental wholesale fee, Virgin Media will, for the first time, have the option of carrying any of Sky’s basic HD channels, Sky Sports HD 1 and Sky Sports HD 2, and all Sky Movies HD channels.
Virgin also owns a 50% stake in UKTV, which owns channels such as Dave and Watch, with BBC Worldwide owning the other 50%. Virgin has been considering selling its holding for more than two years, with BBCW having mandated Credit Suisse to sound out with private equity firms on a joint bid.
