BSkyB takes strategic £1bn ITV stake

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James Murdoch has burst into the battle to control ITV, buying 17.9 per cent of the UK’s largest commercial broadcaster and frustrating the ambitions of two rival suitors as they raced to finalise bids for the company.

The near-£1bn bet by British Sky Broadcasting, the satellite broadcaster that Mr Murdoch leads, came as NTL, its cable television rival, was finalising a £5bn-plus bid for ITV. It also interrupted talks between RTL, the pan-European broadcaster, and Kohlberg Kravis Roberts about providing private equity financing for a rival approach.

As ITV’s largest shareholder BSkyB would be able to block either bid and could have a decisive voice in the future of ITV.

But Sir Richard Branson’s Virgin Group, which is NTL’s largest shareholder, said it would appeal to the UK and European competition authorities on the grounds that BSkyB was acting to disrupt market forces. “This is the biggest mistake Sky has made in the history of the company,” said Virgin.

Although BSkyB is allowed to buy up to 19.9 per cent of ITV, it may still have to pass a public interest test if it is deemed to have substantial control.

The media clout of Rupert Murdoch, BSkyB’s chairman, may complicate the deal’s political dimension, although analysts said BSkyB’s decision not to seek a board seat may have been to reduce such concerns.

ITV said BSkyB had confirmed its intention of “working constructively with ITV and exploring options to create value for all shareholders”.

It said it looked forward to further discussions with its new shareholder. In spite of paying 135p per share – almost 20p more than last night’s closing price – he said BSkyB saw “an exciting opportunity for long-term value creation”.

The price is at the top end of analysts’ expectations of what a bidder could pay for ITV.

NTL and RTL would not comment on the impact on their bid plans but NTL said: “It is surprising that James Murdoch has spent all week pouring cold water on our deal only to spend just short of £1bn contradicting himself.”

Mr Murdoch said that “the task at hand” for ITV was to find new leadership, following the departure of Charles Allen, its former chief executive.

However, he insisted he had not been briefed on ITV’s selection plans and would not say who he thought would be best suited for the job.

BSkyB acquired the £940m stake on Friday from Fidelity and Brandes, two of ITV’s largest and longest-standing shareholders. It funded the purchase from cash and its existing credit facilities.

Mr Murdoch described the purchase as a long-term financial investment but said there were opportunities for “fruitful relationships” between the UK’s largest pay TV operator and its largest commercial broadcaster.

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