Cable billionaire John Malone took another step to expand in TV programs and production with the purchase of a stake in ITV Plc (ITV), the U.K.’s biggest commercial broadcaster with top-rated shows such as “Downton Abbey.”
Malone’s Liberty Global Plc (LBTYA) acquired 6.4 percent of London-based ITV from Rupert Murdoch’s British Sky Broadcasting Group Plc (BSY) for 481 million pounds ($824 million). ITV shares jumped 6.2 percent in London. Liberty Global said it doesn’t plan to make a full takeover bid for now.
The purchase gives Liberty Global, owner of U.K. cable provider Virgin Media, a stake in channels including ITV, ITV1 and ITV Family, and indicates a strategy shift to focus more on owning content. It’s also reminiscent of earlier Malone deals to build stakes in cable companies before seeking takeovers. The value of content is also behind Murdoch’s $75 billion bid for Time Warner Inc. (TWX)
“It is hard to see how this will not be looked at as anything other than Liberty planting a flag in the ground for a potential acquisition at some point” of ITV, Liberum Capital analyst Ian Whittaker said in a note.
Liberty Global paid 185 pence a share for the ITV stake. The stock climbed as high as 202.7 pence today. Liberty Global fell 0.3 percent to $44.32 at 12:33 p.m. in New York.
The ITV stake moves Liberty Global deeper into production and content assets, a move Chief Executive Officer Mike Fries said wasn’t on the agenda when it acquired Virgin Media for $16 billion last year. In May, Liberty Global bought TV producer All3Media in a partnership with Discovery Communications Inc. (DISCA) for almost $1 billion. Malone owns 29 percent of voting rights in Discovery.
Internet TV and film-streaming services such as Netflix Inc. have reshaped the industry for Liberty Global and other cable companies, because owning the rights to content has become more valuable as programs are accessed in more ways -- increasingly via mobile devices and the Internet, as well as through traditional satellite, cable and TV platforms.
Murdoch’s Twenty-First Century Fox Inc. has offered $75 billion to acquire Time Warner. Such a combination would bring together film studios, production houses and a worldwide TV channels business. The bid has been rejected.
In the U.K., ITV competes with Channel 5, which was sold in May to Viacom Inc. (VIAB) ITV’s shares have more than quadrupled in the past five years and the company has long been the subject of takeover speculation. The broadcaster is reducing its dependence on advertising by investing in content and by acquiring production assets under Chief Executive Officer Adam Crozier, the former head of Royal Mail who took over in 2010.
“We note Liberty Global’s announcement and we will work with them as with any other shareholder as we continue our strategy of growing ITV,” ITV said in a statement.
Malone has built a European pay-TV empire over the past few years, spending almost $50 billion in the process. Liberty Global has been building stakes in companies as well as orchestrating full takeovers.
In January, Liberty Global agreed to buy Dutch cable provider Ziggo NV for 4.9 billion euros ($6.6 billion) after gradually boosting its holding. Malone may also look to Belgian cable provider Telenet Group Holding NV, in which Liberty Global owns a majority. Telenet investors rejected a 2 billion-euro bid from Liberty Global for the remaining stake in March 2013.
Today’s deal will give BSkyB cash to help finance its planned acquisition of pay-TV assets. The company, which is 39 percent owned by Fox is in talks to buy Fox’s Italian and German units. A transaction could be valued at about 10 billion euros, people familiar with the matter said in May.
Liberty Global said today the ITV investment doesn’t require regulatory approvals. It will be financed through a loan linked to a hedging transaction that’s secured by ITV shares and existing liquidity, it said.
Under U.K. takeover rules, Liberty Global must now wait six months if it intends to make a full bid for ITV. Those rules can be waived if there’s a major change in ITV’s business or if the board consents to merger talks.
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