Andrew Sachs (L) and John Cleese in BBC's 'Fawlty Towers'
Comic hit: Andrew Sachs, left, and John Cleese in ‘Fawlty Towers’, which appears on Gold

Virgin Media on Monday made its long-awaited exit from the business of content ownership after selling its stake in UKTV, the broadcaster of digital channels including Gold and Dave.

Scripps Networks Interactive, the US owner of the Food Network and the Travel Channel, will pay about £239m ($390m) for Virgin’s 50 per cent stake in UKTV, which is watched by as many as 36m viewers a month. BBC Worldwide will retain its ownership of the other half of the group.

Scripps will also pay £100m for the outstanding commercial stock and debt owed to Virgin Media by UKTV, giving the digital broadcaster an implied valuation of about £580m.

Virgin Media has been exploring its options for UKTV for more than a year, having sold its Virgin Media TV channels business to British Sky Broadcasting last year.

Virgin spends hundreds of millions of pounds a year on content distribution deals but the UKTV sale underlines its shift in focus over recent years towards broadband infrastructure and packaging third-party content.

That includes reselling BSkyB’s sports channels and Spotify, the internet jukebox service, as well as securing film content from Walt Disney and Warner Bros for its on-demand 3D TV service. A carriage agreement between UKTV and Virgin as part of the deal will see it show a further five high-definition channels by next year, including Dave HD and Alibi HD.

Neil Berkett, Virgin Media’s chief executive, said: “This [deal] will allow us to continue to focus on providing a transformative experience for our customers by developing our core strategic strength – the UK’s leading digital network – alongside our leading entertainment services.”

Scripps said the deal was part of its “core” international strategy. It launched the Food Network in the UK on Sky in 2009 and last month added the channel to Freeview, the digital terrestrial broadcast platform.

“UKTV is a significant opportunity for Scripps Networks Interactive to participate in a thriving multi-channel, dual revenue stream media business in one of the world’s largest television markets,” said Kenneth W. Lowe, chairman, president and chief executive of Scripps.

Scripps is negotiating with BBC Worldwide to give the BBC’s commercial arm an option to increase its stake in UKTV to 60 per cent.

“The launch of UKTV in 1997 created a secondary platform for content from the BBC and UK independents [production companies] that has delivered great value back to all stakeholders,” John Smith, chief executive of BBC Worldwide, said. “The new agreement we are developing will bring benefits to UKTV’s audiences in the way they can consume content and will help to sustain UKTV’s track record of growth.”

Goldman Sachs and UBS advised Virgin Media on the transaction.

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