BSkyB swallows £350m loss on ITV stake

Sky finally sells some of its ITV shares at a big loss (although it will actually show as profit this year...)

by
Last Updated: 31 Aug 2010

BSkyB has finally bowed to the inevitable and flogged around 10% of its stake in broadcaster ITV, for £196m – thus bringing to an end a two-year legal wrangle (much to the chagrin of competition lawyers, no doubt). You have to say the whole episode has been a disaster for Sky financially: it’s lost about £350m on the shares, all told. On the plus side, at least the NTL merger didn't happen. Equally, the legal delay helped Sky get a higher price – and because it’s already written off the value of its holding, this sale will show up as a big one-off profit in its annual accounts. And given that it's kept a stake of about 7.5%, it will still have plenty of opportunity to stick its oar in…

Sky announced that it had flogged 404m shares – equivalent to 10.4% of ITV – at 48.5p a share to Morgan Stanley, which in turn has flogged them on to institutional investors (though we don't know who - ITV will hope it's someone friendly). Given that Sky paid 135p for the shares back in November 2006 (to block a merger with N— sorry, to become a strategic investor), that’s a pretty big financial hit. Although it could have been worse: at one point ITV’s share price plummeted as low as 20p, so stringing out the appeal process for all this time has actually saved Sky quite a lot of money. Who said expensive lawyers weren’t worth it?

Of course, ever since the Competition Commission came out in opposition to Sky owning such a substantial chunk of ITV, this outcome was always the most likely. Even Sky recognised this, writing down the value of its stake by £616m in 2008, and another £191m last year. This has two obvious benefits: one, it meant they took the big hit in a year already affected by the recession, when everyone was struggling. And two, any money they did make on the eventual sale – as it turns out, almost £200m – would go straight to the bottom line. The same goes for any increase in the value of its remaining 7.5% stake, since it has already been written down to zero on Sky’s books. God bless accountants.

And this seems to us to be a key point: Sky may no longer have a near 18% stake, but a holding of 7.5% still makes it an influential voice around the boardroom table. The good news for chairman Archie Norman and CEO Adam Crozier is that all their interests are now aligned – a big hike in the share price and everyone’s a winner. In fact, according to our (possibly shonky) maths, if Crozier somehow manages to get the share price up to about £2.65, Sky might even make all its money back...


In today's bulletin:

Sterling pounded as euro plummets and deficit widens
Snow blamed for 'awful' January sales
BSkyB swallows £350m loss on ITV stake
Graduate jobs down just 9% in 2009
The value of battle-scarred execs

Find this article useful?

Get more great articles like this in your inbox every lunchtime

“You literally have to rewrite your job description”

One minute briefing: In hard times, your network becomes more important than ever, says Prezi...

5 bad habits to avoid when leading remotely

In a crisis, it can be hard to recognise when you've taken your eye off...

A top-level guide to scenario planning

COVID creates unprecedented uncertainty, but there are tried and tested ways of preparing for an...

Is it favouritism to protect an employee no one likes?

The Dominic Cummings affair shows the dangers of double standards, but it’s also true that...

Masterclass: Communicating in a crisis

In this video, Moneypenny CEO Joanna Swash and Hill+Knowlton Strategies UK CEO Simon Whitehead discuss...

Remote working forever? No thanks

EKM's CEO Antony Chesworth has had no problems working from home, but he has no...