Listen to this article
This is an experimental feature. Give us your feedback. Thank you for your feedback.
What do you think?
Telewest, the UK cable operator, is understood to have ruled out private equity bidders in the auction for Flextech, its content business.
A wide range of bidders including UK and US broadcasters and financial buyers have put in non-binding indicative offers for Flextech, whose operations span from UKTV, a venture with the BBC, digital channels and Sit-UpTV, which owns shopping channels. The bids are understood to be valued at £1bn ($3.3bn).
Broadcasters including ITV, BSkyB, Channel 4, RTL, Viacom and Turner Europe are understood to be among the interested trade buyers, while Cinven is also reported to have bid.
However, Telewest is thought to be interested in trade buyers, who are able to bring content, channels and cross promotion to Flextech. Telewest is in the process of drawing up a short list and some private equity bidders are understood to have been contacted by Telewest.
Telewest is thought to be considering an outright sale or a sale of a stake in Flextech, although some analysts see the latter as the more likely scenario.
The BBC is understood to have a large say in Flextech’s buyer. If Flextech is sold, a change of control clause gives the BBC the right to acquire the 50 per cent of UKTV it does not own at a market rate.
Some media executives have raised doubts over whether the sale was a genuine process. Charles Allen, chief executive of ITV, last week suggested it could be an “elaborate valuation exercise.”
Telewest is in the process of negotiating a merger with NTL, its larger UK counterpart. A concrete valuation for Flextech is understood to be essential in an event of a merger – expected to be in the form of an offer by NTL for Telewest – in order to avoid legal challenges by minority shareholders.
NTL and Telewest are working towards a mid-October deadline for an announcement of the merger. NTL is expected to make a cash and shares offer for Telewest. Negotiations had been complicated due to issues surrounding deferred tax assets, and are understood to have temporarily broken down late last month as Telewest rejected NTL’s offer as it did not reflect the former’s growth prospects.
Meanwhile, NTL and Telewest are considering an outsourcing agreement with Marconi for their network technicians. While there will be no redundancies, outsourcing technical staff will reduce the cable groups’ costs ahead of a merger.