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Virgin Media owner Liberty Global says no plans for ITV takeover bid after acquiring BSkyB shares ITV shares rocket as Virgin Media owner Liberty Global buys £481m BSkyB stake
(about 5 hours later)
US cable giant Liberty Global said it was excited to be a shareholder of ITV after the "opportunistic and attractive" investment in its largest market. ITV shares soared today after Virgin Media owner Liberty Global bought a 6.4 per cent stake for £481 million, in a move that increased speculation about a takeover bid.
The sale by BSkyB has raised £481 million and is the final piece of the 17.9 per cent stake it took in 2006 in a move that scuppered a takeover of ITV by NTL, which later became Virgin Media. BSkyB was subsequently ordered to reduce its stake in ITV to below 7.5 per cent due to competition concerns. American media mogul John Malone, who controls Liberty, bought the ITV shares from BSkyB, whose top shareholder, Rupert Murdoch’s 21st Century Fox, is a long-standing rival.
Liberty, which is headed by Colorado-based billionaire John Malone, broke into the UK market last year with a £10 billion takeover of Virgin. At the time of the deal, Liberty vowed to become a "disruptive challenger" in the pay TV market. However, Sky was happy to sell at 185p a share as it plans an estimated €10 billion takeover of Sky Italia and Sky Deutschland.
Announcing the acquisition of its stake today, Liberty told the City that it does not intend to make an offer for ITV. It also emerged yesterday that Fox has made an audacious $80 billion (£47 billion) bid for Time Warner.
However, shares in ITV jumped by 9 per cent to around 200p after the acquisition. Liberty chief executive Mike Fries insisted the ITV purchase was just an “opportunistic and attractive investment”, adding it “does not intend to make an offer to acquire ITV”.
Liberty chief executive Mike Fries said: "This is an opportunistic and attractive investment for us in our largest cable market. ITV is the leading commercial broadcaster in the UK and we're excited to be shareholders." However, ITV shares soared as much as 9 per cent to touch 200p as City analysts reckoned the Downton Abbey and  X Factor broadcaster is “in play”.
BSkyB originally spent £940 million on the ITV stake in November 2006, snapping up the shares at 135p each. Analysts at Investec said speculation about further takeover activity was “almost inevitable”.
It suffered a near £350 million hit in 2010 when it sold a 10.4 per cent stake at 48.5p each - totalling £196 million - after a decision by the Court of Appeal upheld the Government's ruling that it must sell down its 17.9 per cent stake. Liberum Capital added: “Liberty’s purchase suggests it may be interested in acquiring the asset at some point as Virgin Media tried to do nearly a decade ago.”
Sky's original shares raid took the market by surprise and infuriated major NTL shareholder Sir Richard Branson. Virgin, then called NTL, tried to merge with ITV in November 2006 but was blocked by Sky, then under the leadership of James Murdoch, which memorably swooped for a 17.9 per cent stake in ITV at a cost of £940 million.
PA Sky insisted at the time it saw “long-term value” in the ITV investment but it paid a heavy premium, buying at 135p a share to acquire its stake.
ITV shares subsequently slumped in the recession and competition regulators ordered Sky to cut its stake below 7.5 per cent, forcing the pay-TV giant to sell 10.4 per cent at a heavy loss at just 48p a share in 2010.
Sky has made a profit by selling most of its remaining stake now at 185p. It means it has made a relatively small overall loss of about £200 million.
Sky approached City institutions about selling the shares, rather than seeking out Liberty. Malone’s company heard the stake was for sale and offered a slight premium.
Virgin and Sky have had a fractious relationship, dating back before Liberty bought Virgin for £15 billion in 2012. However, relations have improved, partly because both see BT as a shared enemy.
Liberty, which is now ITV’s largest shareholder, is expanding fast, buying a joint share of All3Media, the British TV producer behind Hollyoaks, and other European broadband firms. The market is consolidating as companies seek global scale. America’s Viacom, owner of MTV, bought Channel 5 earlier this year.
ITV shares were up 12.9p at 196.7p. BSkyB rose 5p to 895p.