British Sky Broadcasting Group PLC is negotiating with 21st Century Fox Inc. to acquire the company's pay-TV assets in Germany and Italy. The move is an effort to bulk up BskyB's European stronghold in the midst of major entertainment holding changes on the continent.
BskyB would buy 21st Century Fox's 57 percent stake in Sky Deutschland, worth around $4.4 billion as of last week. A mandatory takeover of the rest of the company would come next. 21st Century Fox owns all of Sky Italia, a major sports broadcaster in Italy.
The combined group would have almost 19 million customers when Sky Italia's 5 million customers and Sky Deutschland's 3.7 million customers are added to BskyB's current 10.6 million customers.
The deal, should it come to fruition, will pit long-time partners and foes Rupert Murdoch and John Malone, who runs Liberty Media, against each other. Liberty Media has spent about $50 billion over the last decade building up one of Europe's largest media empires and currently serves about 25 million customers.
Europe still has a lot of upside growth in the pay TV arena, with only 41 percent of the people having TV subscriptions compared to 90 percent of U.S. consumers, according to research from Ovum Ltd.
Murdoch and Malone have a long and storied history, sometimes as partners and at other times, fierce competitors. Malone's Tele-Communications Inc. and Murdoch's Fox Broadcasting were the first two companies to cut a retransmission consent deal in 1993, a deal that at the time was considered a win-win for both sides of the pay TV business. But it would also set the stage for some very contentious and nasty negotiations between distributors and programmers that exist to this day.
The two executives also tussled about a decade ago when Malone wrested control of DirecTV (NASDAQ: DTV) from Murdoch and resulted in Murdoch's retreat from the U.S. distribution business.
Of course, all this maneuvering by Murdoch is really a familial reshuffling of sorts. BSkyB is 39 percent-owned by 21st Century Fox Inc., which until June was part of the same company as News Corp. before it was split from the programming side of the company. The original News Corp. in 2011 abandoned a planned bid for the rest of BSkyB after a reporting scandal at the company's U.K. newspaper unit.
But to address possible conflicts of interest, BSkyB said all board discussion of the issue is solely within a committee composed of its independent directors, which doesn't include directors affiliated with 21st Century Fox.
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