Channel 5 bidders question broadcaster’s valuation

Suggestion that bids might reach only £300m branded ‘nonsense’

Richard Desmond

A war of words has broken out over the valuation of Channel 5, ahead of this month’s deadline for second-round bids for the broadcaster owned by entrepreneur Richard Desmond.

In January, people close to the bidding process said Mr Desmond was seeking a price of more than £700m for the channel, which he bought from RTL in 2010 for £103.5m.

But the due diligence process had found “not a lot to like”, according to one potential bidder, who added that Channel 5’s financial performance was masked by deals with Mr Desmond’s newspapers and magazines.

Another person said the most likely outcome was not a sale but a recapitalisation, which would allow Mr Desmond to pay himself a large dividend.

However, suggestions that second-round bids would reach £200m-£300m were branded “complete nonsense” by a spokeswoman for Channel 5.

Five US-based companies are likely to bid in the second round, a person close to the process said.

They include Discovery, Viacom and Scripps – three US networks that are looking abroad for growth at a time when some observers suggest their home market has become saturated.

BSkyB is working in partnership with Discovery, according to some people familiar with the bidding. But other UK broadcasters ITV and BT have ruled themselves out as potential acquirers.

Channel 5 boasts a prominent position on Britain’s electronic programming guide, and returned to profit last year.

Its operating profits were £20.6m in the first half of 2013, compared with a loss of £16.7m for the whole of 2012.

However, unlike ITV, which has enjoyed a sharp rise in its share price in recent years, Channel 5 does not produce many of its own shows.

One of the channel’s biggest hits, the Endemol-produced Big Brother, is contracted until the end of 2015. That is likely to reduce the broadcaster’s attractiveness to US networks, even though many have their own programming to deploy.

Channel 5 has appointed Barclays to run the bidding, with second-round offers due by April 14.

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