LONDON, Sept 29 (Reuters) - Pay-TV firm BSkyB lost an appeal to keep hold of
its stake in ITV on Monday in a ruling which could cost it hundreds of millions
of pounds and potentially make free-to-air broadcaster ITV a bid target.
BSkyB had challenged an earlier ruling by British regulator the Competition
Commission forcing it to reduce its 17.9 percent stake in ITV to below 7.5
percent. But the appeal was rejected by the tribunal in a central London court.
BSkyB can still appeal to the Court of Appeal and it said it would consider
its next steps in due course.
BSkyB bought the stake in 2006 for 135 pence a share or 940 million pounds
($1.7 billion) in a deal which effectively blocked cable group NTL -- now named
Virgin Media -- from buying ITV.
With ITV's shares closing at 41 pence on Monday, the stake is now worth less
than 300 million pounds.
The ruling is the latest twist following the controversial purchase which
pitted the Murdoch family against Britain's most famous entrepreneur, Richard
Branson.
The move, spearheaded by then BSkyB Chief Executive James Murdoch, prompted
a slanging match between the two sides, with Virgin Media's largest shareholder
Branson labelling Sky and the Murdochs a threat to democracy.
"The Tribunal unanimously decides .... Sky's application is dismissed,"
Tribunal President Gerald Barling told the court. The written judgment said: "In
our view there is no substance in Sky's complaint."
Virgin Media had also appealed to the Tribunal, demanding BSkyB should be
forced to sell the whole stake, and the court said it accepted parts of the
Virgin argument.
Virgin Media had challenged the Competition Commission's conclusion that the
stake purchase had not materially affected the "sufficiency of plurality" in the
UK media market.
The parties will now have to submit arguments regarding the Virgin Media
appeal by Oct. 6 and if there is a hearing it will be held on Oct. 15.
SKY DEFENCE
BSkyB has always maintained that it acted within the Communications Act,
which prevents it from owning more than 20 percent of ITV due to its other media
interests.
It also argued that the Competition Commission made mistakes, including in
its decision that a merger had occurred between the two companies and that the
investment prevented ITV from pursuing an independent competitive strategy.
BSkyB also offered to give up all its voting rights which it said would
prevent it from influencing strategy.
ITV welcomed the ruling.
The presumption BSkyB would have to sell down its stake had caused ITV's
shares to edge higher in recent weeks on speculation that any sale could lead to
a full bid.
Europe's biggest commercial broadcaster RTL, Italy's Mediaset, and "Big
Brother" maker Endemol, part owned by Mediaset, have all been linked with the
company.
But most analysts are sceptical.
"We can certainly see the attractions for an investor with a long-term
investment horizon buying a 10 percent stake," said analysts at Numis on ITV,
the home to soap opera "Coronation Street".
"However, a full bid for ITV could cost in excess of 4 billion pounds
(equity value 2.5 billion pounds at 65 pence per share, 700 million pounds debt,
pension buyout 1 billion pounds) which would be difficult to fund in these
markets, particularly given the uncertain advertising outlook.
(Reporting by Georgina Prodhan; Editing by David Holmes and Jon
Loades-Carter) ($1=.5548 Pound) Keywords: BSKYB ITV/
tf.TFN-Europe_newsdesk@thomsonreuters.com
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