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SBD Global/July 28, 2014/Finance
U.K.'s Sky Pays 21st Century Fox $9B For Sky Italia, Sky Deutschland
Published July 28, 2014
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'GREATER HEADROOM': Also in London, Juliette Garside reported the merger better positions Sky to "compete with John Malone, a longtime Murdoch rival who is building Liberty Media into Europe's largest cable television business with control of Virgin Media and a slice of ITV" in the U.K. It also provides a "buttress against the growing distribution might of Apple, Google, Amazon and Netflix," which are using the Internet to build multibillion-dollar video businesses. Numis bank analyst Paul Richards said, "The headroom for growth in Italy and Germany is much greater. BSkyB has executed really well in the U.K. over the last decade or two and is looking to export that capability into other markets in Europe" (GUARDIAN, 7/25). In N.Y., De La Merced & Scott reported the focus on the deal from analysts and investors "centered, perhaps unsurprisingly, on how it could change the dynamics of 21st Century Fox’s quest to win over Time Warner and create an enormous media conglomerate" with assets as diverse as HBO, Warner Bros., Fox News Channel and the 20th Century Fox film and TV studios "living under one roof." Cash from the Sky deal "could be added to a huge financing package that would support a Time Warner purchase" (N.Y. TIMES, 7/25).
ANALYSTS WEIGH IN: In L.A., Georg Szalai reported analysts mostly focused on the "financial flexibility" for Sky after the deals, including its ability to bid for Premier League rights next year when BT is "expected to once again bid aggressively." Jefferies & Co. analyst Jerry Dellis said that Sky's decision to "partly fund the deal by issuing additional stock to investors" was "a mild surprise" but leaves the "post-deal BSkyB balance sheet in a stronger position." UBS analyst Polo Tang said, "We are positive on the creation of Sky Europe, as it will create a scale player with the ability to acquire pan-European rights and deliver faster growth." Richards "also focused on synergy promises." He wrote in a report, "This level of synergies is consistent with our upper-end forecasts but will be achieved more quickly than we had expected" (HOLLYWOOD REPORTER, 7/25). REUTERS' Quentin Webb opined this has "been mulled for years, and is in a sense a housekeeping exercise." The businesses have common branding and "already collaborate on technology and productions, while executives flit from one to another." But "Sky Europe" is "more than a tidy-up." Sky cuts its reliance on Britain, where it is now "fighting the deep-pocketed BT, and gets new growth potential." More than half of Britons "already pay for television." The comparable figures are 19% in Germany and 28% for Italy. The "bigger group should be able to better hold its own against tech, telecoms and content giants" (REUTERS, 7/25).