BSkyB bids for Virgin cable channels

Pay TV company offers $258 million

Blighty’s biggest paybox BSkyB has weighed in with a £160 million ($258 million) bid to buy the channels business of rival Virgin Media, the debt-laden Nasdaq-quoted U.K. cable giant.

The offer for digital webs Living, Living 2, Bravo, Bravo 2, Challenge, Challenge Jackpot and Virgin One is thought to be about 60% higher than its nearest challenger, according to a report in the Financial Times.

Virgin Media, which is selling the webs to focus on its high-speed broadband business, is said to have received offers from Time Warner, NBC Universal, RTL and Channel 4 for the portfolio.

None of these are understood to have bid more than $162 million, much less than BSkyB is apparently prepared to pay. Recent estimates suggest that the seven channels are worth up to $210 million.

It is unclear whether BSkyB is bidding so much because it wants to raise the price rivals will have to pay or because of what the satcaster regards as the package’s intrinsic worth.

Media consultant Steve Hewlett suggests that BSkyB’s huge bid may also include an offer for Virgin’s half of UK TV, which it co-owns with the BBC. BSkyB tried to buy UK TV, Blighty’s biggest owner of pay channels after BSkyB, several years ago, but then-owner NTL changed its mind and decided not to sell

“I am not surprised BSkyB is bidding for these channels,” Hewlett said. “It takes a long while and a lot of expense to establish channels and these are all well-known brands. BSkyB has deep pockets and strategically is determined to expand its content offering.”

Paul Richards, media analyst at Numis Securities, told the FT: “It’s a matter of what Sky can bring to the process. When it bought Amstrad (a U.K. electronics company that made the original satellite dishes for BSkyB) in 2007, people raised eyebrows about the price but from our perspective, that now looks like a very, very good deal.

“If you bolt these Virgin Media channels into the BSkyB infrastructure, you could see a significant uplift.”

BSkyB, which until last fall was locked in a fierce dispute with Virgin over carriage fees for its channels, declined to comment. Virgin Media also refused to comment.