British publisher Reed Intl. is negotiating to sell its 3.7% stake in British Sky Broadcasting to fellow shareholders Pearson, Chargeurs and Granada.The deal, expected to be completed in the next couple of weeks, will provide the first official valuation of the satellite TV venture, which is 50%-owned by Rupert Murdoch’s News Corp. Financial analysts estimate the company’s equity is currently worth between T 2 billion and T3 billion ($ 2.9 billion to $ 4.4 billion), giving the Reed stake a possible price of T75 million to T110 million ($ 109 million to $ 160 million). Reed has invested T60.1 million ($ 87 million) in BSkyB, and also provided loan guarantees worth T131 million ($ 190 million). This liability will be transferred to the other three shareholders, as part of the sale of Reed’s stake. Reed, Pearson, Granada and Chargeurs were the four main shareholders of British Satellite Broadcasting at the time of its merger with Murdoch’s Sky Television in November 1990. Reed was the only one that decided not to participate in the subsequent refinancing of the new BSkyB, and consequently saw its holding diluted from 10.5% to 3.7%. The decision to scale down its involvement was strategic. Taking part in the refinancing would have cost Reed only T25 million, and if the present conservative pricetag of T2 billion for BSkyB is correct, this investment would today be worth T136 million. But Reed, a publishing conglom whose titles include Daily Variety and Variety , wanted to concentrate on professional and reference publishing, and reportedly was uneasy about being a minority shareholder. Reed’s merger with Dutch group Elsevier, which was completed last month, consolidated this strategy. “In May 1991, I explained that our existing publishing and information businesses had first priority so far as further investment was concerned, and that we had decided not to join our partners in putting more funds into BSkyB,” said Reed chairman Peter Davis. “The merger with Elsevier confirmed this view of our strategic priorities.” London stockbroking firm James Capel will today issue a new report on BSkyB’s prospects, which downgrades previous profit forecasts but reconfirms the overall valuation of T2 billion. Capel’s Neil Blackley predicts profits of T680 million for BSkyB in 2000, 5% lower than his previous estimate. The slide in the value of the pound against the dollar means that BSkyB’s Hollywood film contracts will cost the company an extra T25 million a year until the end of the century, Blackley said.
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