BSkyB, itself 39.1% owned by Rupert Murdoch's company, says that its enlarged corporate entity 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. It says that the new business will have expanded growth opportunity, benefits of scale, and significant synergy potential and will immediately be the leading pay-TV provider in three of the four largest markets in Europe.
Indeed the deal will see BSkyB managing assets with 11.5 million customers in the UK, 3.7 million in Germany and 4.8 million in Italy, with respective current revenues of £7.6 billion, £1.3 billion and £2.3 billion. Between them the three companies have 47.5 million subscription products. BSkyB calculates that the new company will have plenty of growth potential in countries with 97 million addressable households, around 66 million of which have yet to take pay-TV. BSkyB was confident that there was significant headroom to sell additional products to and launch new services to those in these homes.
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. It believes that the significant majority of synergies will arise from the UK and Italy being the two businesses with larger and more similar direct to home operations.
Both transactions are subject to regulatory and independent shareholder approval. However, 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.
Commenting on the move, 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."
Even though many analysts see the deal as being orchestrated by the Murdoch-led organisation in the US, BSkyB stressed that the transaction has been confined solely within a committee composed of independent directors of BSkyB. Indeed it explicitly stated that directors affiliated with 21st Century Fox have not participated in the deal.