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:US) acquired 6.4 percent of London-based ITV from British Sky Broadcasting Group Plc (BSY) for 481 million pounds ($824 million). ITV jumped as much as 9.4 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 operator Virgin Media, a stake in free-to-air channels including ITV, ITV1 and ITV Family, and shows that it is reversing an earlier stance of steering clear of deals for media content. In May, Liberty Global bought TV producer All3Media in a partnership with Discovery Communications Inc. (DISCA:US) for almost $1 billion. Malone owns 29 percent of voting rights in Discovery.
“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 7.9 percent to 198.40 pence at 10:36 a.m. in London trading.
The ITV stake moves Liberty Global deeper into production and content assets, a move Chief Executive Officer Mike Fries insisted was not on the agenda when it bought Virgin Media for about $16 billion last year.
Internet TV and film-streaming services such as Netflix Inc. have changed the game 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.
The value of content is behind yesterday’s news that Twenty-First Century Fox Inc. offered about $75 billion to acquire Time Warner Inc. (TWX:US) Such a combination would bring together film studios, production houses and a worldwide TV channels business. The bid was rejected.
In the U.K., ITV competes with Channel 5, which was sold in May to Viacom Inc. (VIAB:US) 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,” an ITV spokesman said in a statement today.
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 Twenty-First Century 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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