BSkyB to create a world-class multinational pay TV business with acquisition of Sky Italia and 57.4% stake in Sky Deutschland
BSkyB today announces it has entered into agreements with 21st Century Fox to acquire 21st Century Fox's 100% stake in Sky Italia and its 57.4% interest in Sky Deutschland. The enlarged company will be a world-class multinational pay TV provider that serves 20 million customers and brings together the leading pay TV businesses in three of Europe's four biggest markets.
The total consideration for the acquisition of Sky Italia is £2.45 billion with approximately £2.07 billion to be paid in cash and the balance to be satisfied through the transfer of BSkyB's 21% stake in National Geographic Channel International to 21st Century Fox at a value of £382 million. The acquisition of 21st Century Fox's shareholding in Sky Deutschland is for a consideration of £2.9 billion in cash, valuing Sky Deutschland at €6.75 per share. The transactions are subject to regulatory and independent shareholder approval.
Creating a world-class multinational pay TV business
The combination of the three businesses will build on BSkyB's strong track record of delivery and success in the UK and Ireland. Over the last five years, BSkyB has more than doubled its paid-for subscription product base and increased revenues by 43% as a result of its well-established strategy of broad-based growth.
The enlarged business will benefit from a significantly expanded opportunity for long-term growth and value creation, with 97 million addressable households. Of these households, around 66 million have yet to take pay TV and there is significant headroom to sell additional products to and launch new services for customers.
The acquisitions will also bring benefits of scale, taking BSkyB from 11.5 million customers to 20 million. On an aggregated basis, group revenues will increase from £7.6 billion for the standalone BSkyB to £11.2 billion.
The enlarged group will be better positioned to take advantage of the enhanced growth opportunity as result of the ability to share expertise across the wider business. BSkyB, Sky Italia and Sky Deutschland are complementary businesses with a common brand, operating similar business models and offering similar products to customers. Bringing them together will enable the application of best-in-class capabilities in areas such as content, innovation and service delivery, to the benefit all of three businesses and their customers.
Offer to minority Sky Deutschland shareholders
Following the agreement to acquire 21st Century Fox's 57.4% stake in Sky Deutschland, BSkyB has announced that it will launch a voluntary cash offer to Sky Deutschland's minority shareholders at €6.75 per share. There is no minimum acceptance condition as BSkyB believes it can realise the advantages of closer collaboration with Sky Deutschland and support its continued growth and development with the 57.4% stake it is acquiring through this transaction.
The total consideration for the acquisition of Sky Italia is £2.45 billion with approximately £2.07 billion to be paid in cash and the balance to be satisfied through the transfer of BSkyB's 21% stake in National Geographic Channel to 21stCentury Fox at a value of £382 million. Subject to the number of Sky Deutschland minority shareholders that accept the offer, the total cash consideration overall may be up to approximately £7.0 billion.
The consideration will be funded in part by the proceeds of a placing of 156.1 million new Ordinary Shares representing approximately 9.99% of the issued share capital of BSkyB, announced separately today. 21st Century Fox has irrevocably undertaken to participate in the placing pro rata in order to maintain its holding in BSkyB at the current level of 39.14%. The remaining consideration will come from a combination of new debt facilities and cash resources.
Value creation for shareholders
The Transaction is financially attractive and provides a clear path to enhanced value creation for BSkyB shareholders. It is expected to be at least neutral to earnings per share in the second full financial year of ownership and strongly enhancing to earnings per share thereafter.
In addition to the enhanced growth profile of the enlarged group, BSkyB expects to be able to realise £200 million of run-rate cash synergies by the end of the second full financial year after completion, with further additional synergies expected in subsequent periods. The significant majority of synergies are expected to arise from the UK and Italy being the two businesses with larger and more similar direct to home operations. Other than the acquisition of acquired programming rights, cost savings are expected across most areas of the business including the production of live events, commissioning, back office IT systems, rationalisation of suppliers and, over time, in product and set top box development. Management's current estimate is that the costs to achieve these synergies will be around £150 million.
All Board discussion of the Transaction has been confined solely within a committee composed of Independent Directors of BSkyB. Directors affiliated with 21st Century Fox have not participated.
Jeremy Darroch, BSkyB's Chief Executive, said:
"This transaction will create a world-class, multinational pay TV business with enhanced headroom for growth and immediate benefits of scale. 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."
Nick Ferguson, Chairman of BSkyB, said:
"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."