Competition Commission recommends BSkyB cut shares in rival ITV
Written by admin on December 20th, 2007 in Companies, Trading, UK Business.
In the first business post written for Financial Market, we highlight the recommendation made today by the United Kingdoms Competition Commission ordering British Sky Broadcasting to sell a significant proportion of it shares in competitor ITV PLC. Under the recommendations BSkyB must reduce its share stake from the 17.9% it currently owns to below 7.5%.
The recommendation by the Competition Commission will now go to the Secretary of State for Business, Enterprise and Regulatory Reform who has until the 29th of January to reach a conclusion.
As well as the share reduction the Competition Commission also pushed for pledges that BSkyB would not push for a seat on ITV’s board, but didn’t go as far to recommend that BSkyB sell its entire stake in its competitor.
As ITV’s single biggest stakeholder, claims have been made that by having such a large stake in the company it restricts competition and isn’t in the public interest. It was thought that BSkyB could also influence ITV strategy after it acquired the £940 million stake in November last year, and was seen as an attempt to thwart a potential take over by NTL. NTL latter pulled out of takeover talks and BSkyB’s moves were heavily criticised by rivals BBC and Channel 4.
BSkyB had suggested it transfer its voting rights into a trust but the Competition Commission deemed this would be too difficult to enforce.
Analysts have said that although BSkyB will loose a significant sum if forced to sell of its shares, the company has still succeeded in preventing a takeover of the free to air broadcaster.
At current share prices the sell off could cost BSkyB around £200 million as the value of ITV’s shares have dropped since it bought its stake in the company. BSkyB paid a 17% premium when it first invested with what it called a ‘long term investment plan’, and shares at 0900 GMT were trading at 84 pence, far off the 135p a share it paid.
Graph showing ITV shares over the last 2 years -Source www.lse.co.uk
March 6th, 2008 at 10:58 am
[...] hitting record lows in January and February. It is thought that the ongoing argument that has left BSkyB’s 17.9% stake in the firm unresolved, has lead to advertisers becoming more cautious and as such having a direct [...]