French media giant Vivendi is said to be considering a bid to acquire all of the Sky-branded European pay-TV broadcasters.
Reuters have reported ‘early stage discussions’ and analysts at investment bank Exane BNPO-Paribas state that the rumour has been bouncing around for a few weeks. Exane has run some numbers and – assuming a 25 per cent premium to market – says this would be a huge deal for Vivendi (or anyone else) with a bid of €37 billion.
The bank suggests that even it is assumed that Vivendi has a cash pile available of some €10-11 billion to hand, and perhaps even €15 billion if one includes certain disposals which are still working their way through the system, Vivendi would still be looking for finance of about €15 billion to conclude a Sky purchase.
“Synergies are far from obvious at this stage,” says an Exane note. “We see one BIG positive: being in a position to bid for content on a regional basis IF this is the way the content market moves – a real possibility, even if it is years away. Apart from that, Sky is well run and we don’t see massive synergies bar the usual [marginal elements].”
The bank warns that such a complex deal as this would suggest much larger structural risks to the pay-TV business. But it also says that the head of Vivendi, Vincent Bolloré is “very creative” in the way he strikes deals.
Sky share buying buzz
The news that Vivendi might be seeking to buy the trio of Sky Europe broadcasters has prompted considerable activity on the London stock market in Sky shares.
Sky’s share price rocketed from Tuesday’s closing price of £10.23 to an April 8th morning ‘high’ of £10.63 (and a new 12-month ‘high’) before slipping back after profit taking to £10.41, and a sales volume of 2.8 shares in the first 2 hours of trading. The 12-month ‘high’ for Sky was previously £10.32.
Joshua Raymond, chief market strategist at CityIndex says: “Considering the handsome sums Sky has paid recently for majority broadcast rights of the Premier League and its move to large scale production television exclusive to the channel, it’s no surprise that Sky simply has to get a grip on its costs. In this sense, a merger between the two firms could well make sense. However, I cannot foresee Rupert Murdoch selling out just yet and this could well be a ploy from Vivendi to sound out shareholder sentiment on the prospect of a deal with Sky or someone else.”
