LONDON — The revelation that British Sky Broadcasting is in advanced negotiations to acquire Manchester United, the world’s most profitable soccer club, has stunned the U.K., prompting front page headlines and immediate government scrutiny.
BSkyB is 40% owned by Rupert Murdoch’s News Corp. The impending deal — revealed over the weekend and worth a reported $960 million — will increase Murdoch’s already considerable control over sports broadcasting in Britain. Manchester United is expected to see sales of more than $170 million this year, and as the key club in the 20-team English Premier League, the direction it takes is likely to be emulated by other clubs.
BSkyB holds the rights to broadcast the Premier League until 2001 — for which it paid more than $1 billion two years ago. Owning Manchester United would give BSkyB substantial leverage in any future negotiations for broadcasting rights.
The satcaster is also partnered with Manchester United in the club’s digital TV channel, MUTV, part of the 200-channel Sky Digital platform set to launch at the beginning of next month.
The U.K.’s Labour government has indicated that a takeover of Manchester United would be investigated by the Office of Fair Trading. Tony Banks, the government’s minister for sport, said such a deal had “very, very profound” ramifications. Even so, many observers do not see any obvious legal obstacles.
It has emerged, however, that the leisure group Enic may become a second bidder for Manchester United. Enic owns soccer clubs in Italy, the Czech Republic and Greece, and 25% of Scotland’s Glasgow Rangers.
Should Enic enter the fray — believed encouraged to do so in the wake of public and political opposition to Murdoch’s plans — its backing could come from Time Warner, with which it is partnered in restaurant and retail businesses. Enic has been interested in acquiring an English club for some time.
A rival bid would up the price past Murdoch’s initial bid. Last Friday, Manchester United had a market capitalization of $690 million. By the end of Monday, its share price on the London stock exchange had jumped from 159 pence to 208, raising the club’s market capitalization to $898 million.
It is believed that Murdoch has already agreed to buy 14% of Manchester United from its chairman, Martin Edwards, for $134 million. Still, getting other shareholders to sell may not be so easy. Some argue that Manchester United will be worth considerably more in a couple of years.
For Murdoch, acquiring Manchester United is in keeping with his global strategy of using sports to drive pay TV. Earlier this year, Fox Television bought the Los Angeles Dodgers for $360 million.