LONDON — The battle for control of ITV, Blighty’s biggest private terrestrial broadcaster, is poised to develop into a face-off between the Murdoch clan and Virgin Atlantic owner Richard Branson.
With the news that Murdoch-controlled paybox BSkyB had seized a 17.9% stake in ITV, commentators agreed on one thing: James Murdoch, the BSkyB topper, had struck to nix the chances of NTL (in which Branson is the biggest stockholder) buying ITV.
“This is Murdoch saying he wants a seat at the table in any future bid battle for ITV. But at the same time, it is a defensive move because it shows he is scared of the potential commercial clout that a combination of ITV and NTL could represent,” an analyst said.
The audacious move, which saw Murdoch paying $1.78 million for the stake, infuriated Branson. The paybox has bought 696 million shares at $2.54 each.
In common with Rupert Murdoch (chair of BSkyB and owner of 39% of the company), Branson has long held ambitions to become a significant player in ITV. In the new year, debt-ridden NTL will be relaunched as Virgin Media.
“This is the biggest mistake Sky has made in the history of the company,” Branson’s spokesman told the Financial Times.
However, unless ITV’s stock prices fall still further or regulators such as U.K. communications authority Ofcom force Sky to offload the holding, Branson may have been outmaneuvered.
In a statement, BSkyB said it “wishes to explore options to create value in the interests of both BSkyB’s and ITV’s shareholders. BSkyB believes that ITV is one of Europe’s premier broadcasting and production businesses, and holds substantial potential for long-term value creation.”
BSkyB CEO James Murdoch said his company bought the shares without notifying ITV’s board of directors but had told them BSkyB intended to be “a long-term and supportive shareholder.”
“It reflects our belief that ITV’s decline has been overstated. BSkyB would be supportive of the ITV board,” said James Murdoch. “We realize that ITV has been going through tough times, but with careful stewardship it can return to form.”
British TV topper Greg Dyke, interviewed by the BBC, said: “I don’t think James Murdoch believes he can own both Sky and ITV, but he can influence who ends up owning it. It won’t be NTL.”
Last spring, Dyke led an abortive bid for ITV, offering $2.46 a share.
Branson intends to take his case to regulators, arguing BSkyB’s strike amounts to anticompetitive behavior.
But the Murdoch family has a history of working successfully to prevent regulators from blocking the conglom’s plans.
BSkyB’s strong position not only puts NTL in a corner, but gives the satcaster considerable muscle if, as predicted, RTL, the pan-European broadcast giant and owner of Blighty’s Five, emerges as a bidder for ITV.
RTL is understood to have been in talks with Kohlberg Kravis Roberts about private equity finance for an ITV bid when Murdoch pounced.
One intriguing possibility is that BSkyB might allow an RTL bid to go ahead for ITV only if RTL agrees to sell Five to Sky.
Earlier last week, News Corp. chairman Rupert Murdoch told the European Media Leaders Summit: “None of the things NTL is missing is in ITV, and none of the things ITV is missing is in NTL. This doesn’t seem to be a set of solutions for either side.”
In the context of the purchase of almost a fifth of ITV’s stock, those remarks look somewhat disingenuous.
U.K. media ownership rules prevent BSkyB from owning more than 20% of ITV, but there is no similar legal imperative to stop Murdoch from owning Five.
However, with the arrival of digital media creating havoc for all TV broadcasters in the U.K., BSkyB included, it is possible that existing ownership rules could be diluted.
Said media analyst Mark Flanagan: “In two or three years’ time, the 20% rule may be relaxed. James Murdoch is winning friends in government circles.”
British finance minister Gordon Brown, widely predicted to succeed Prime Minister Tony Blair by next summer, is close to Sky, according to one well-placed U.K. media source.
Beyond issuing a bland public statement saying it looked forward to working “with our new shareholder,” ITV is yet to go public on its real feelings toward having Sky owning nearly 20% of the company.
Still minus a CEO — topper Charles Allen was ousted in August following falling ratings and a dismal stock market performance — ITV, according to Dyke, is “in a horrible position.”
He added: “What can ITV do? It can’t sell to anyone else.”
That is, unless Branson, whose attempts to win an ITV license more than 15 years ago were thwarted by regulators because of doubts over Virgin’s ability to run a quality service, can win over Ofcom or European antitrust authorities.
U.K. regulators forced Rupert Murdoch out of ITV station LWT in the 1970s because of worries that he would wield too much power; at the time, he had recently bought bestselling British paper News of the World.
Now, thanks to son James, News Corp. finally has a big slice of the ITV pie.