John Malone’s cable giant Liberty Global (LGI) has bought a 6.4% stake in UK commercial broadcaster ITV for about £481m (US$824m), continuing its European expansion.
The purchase from British Sky Broadcasting Group (BSkyB) follows LGI’s acquisition…
John Malone’s cable giant Liberty Global (LGI) has bought a 6.4% stake in UK commercial broadcaster ITV for about £481m (US$824m), continuing its European expansion.
The purchase from British Sky Broadcasting Group (BSkyB) follows LGI’s acquisition of UK cableco Virgin Media for US$23.3bn last year and should boost its competitiveness with key local rivals such as BSkyB and incumbent telco BT.
Liberty CEO Mike Fries described the deal as “an opportunistic and attractive investment for us in our largest cable market”.
LGI intends to finance the deal with a loan linked to a hedging transaction which would be secured by ITV shares and existing liquidity. Given the level of investment, no regulatory approvals are required, the company said.
Liberty Global said it does not plan a full takeover bid for now, which means that it is now prevented from doing so for six months under the UK takeover code. This can be waived in certain circumstances.
In a note to investors, Nomura analysts said the deal shows Malone has confidence in the standalone value of good content.
“[F]rom a LGI perspective, the clear message from management has been that owning content will give it more influence when negotiating with other platforms/content owners about reciprocal access to exclusive content.”
Liberty, BSkyB and BT have all invested significantly in content recently.
This year, LGI acquired production house All3Media in partnership with Discovery Communications, in which it has 29% of the voting rights, for nearly US$1bn. LGI and Discovery have also been linked to a joint bid for a 49% stake in Formula One.
The Nomura analysts believe LGI’s investment in ITV is an “opportunistic, defensive move to strengthen its negotiating hand for accessing content at reasonable cost in the future”.
In their view, LGI is likely to want to boost its stake in ITV over time to increase its influence over content production, perhaps together with Discovery, The analysts do not rule out a move to take control of ITV in the long term, noting that LGI has used equity to finance deals recently despite its highly-geared balance sheet.
“That said, we expect LGI to prioritise its balance sheet for other network acquisitions such as in Belgium, possibly in Germany and also possibly to fund cheap mobile assets in order to exploit the increasing shift towards convergent packaging of fixed and mobile services in European markets.”
LGI has operations in 14 countries, providing triple-play services to 25 million customers. The company recently offered concessions to the European Commission (EC) in an effort to secure antitrust approval for its planned €4.9bn acquisition of Dutch cableco Ziggo.
