* ITV shares up 6 pct on bid speculation
* Liberty says will not make bid for ITV
* BSkyB sells stake for 481 mln stg
* BSkyB in talks to buy into Germany, Italy
(Adds details on debt, ITV closing price, comment)
By Kate Holton
LONDON, July 17 U.S.-based cable group Liberty
Global has bought BSkyB's 6.4 percent stake in
ITV, Britain's biggest free-to-air commercial
broadcaster, boosting its shares on hopes of a wider bid.
Billionaire John Malone's Liberty, which bought British
cable operator Virgin Media as part of a European expansion last
year, said it did not intend to make an offer for the rest of
the broadcaster, but ITV shares still rose 7 percent.
The sale, at a price of 481 million pounds ($824 million),
may also indicate that BSkyB is looking to raise cash to push
ahead with its own expansion plans after it opened talks this
year to buy Rupert Murdoch's Sky Italia and Sky
The purchase is just the latest in a string of deals in the
global media sector to buy content and follows ITV's drive to
develop its production arm and generate revenue beyond its
traditional, and volatile, advertising source.
"It is hard to see how this will not be looked at as
anything other than Liberty planting a flag in the ground for a
potential acquisition at some point," Liberum analyst Ian
"ITV is now likely to be seen as a potential M&A story,
especially given recent news flow in the media sector."
Just this year, Liberty teamed up with Discovery
Communications to buy TV producer All3Media, Discovery
took a controlling interest in European sports broadcaster
Eurosport and Murdoch's 21st Century Fox has been seeking to buy
The cost for buying protection against a default of ITV's
debt rose in the credit derivatives market, based on the fact
that Liberty Global has a much higher degree of leverage.
Moody's Investors Service rates Liberty Global as
speculative grade, or junk, while it rates ITV as investment
Cable operators have traditionally focused on providing
broadband and television to households, meaning they were more
likely to be aggregators and re-sellers of programming, but
Liberty has owned content companies in the past.
"Liberty Global has previously stated that it would invest
in selected content assets ... but this is still a somewhat
surprising development," Espirito Santo analyst Andrew Hogley
"In our view management will need to provide further clarity
on the group's content strategy and long-term plans."
Dubbed everything from the Cable Guy to Cable Cowboy, Malone
made his fortune through a series of deals that transformed and
ultimately consolidated the U.S. cable industry into one
dominated by a few big players. Liberty Global is now also
present in 12 European companies.
Two people familiar with the situation said BSkyB had
contacted eight banks to auction off the stake on Wednesday
afternoon, which pressured Liberty into offering a premium.
Liberty then called ITV officials to make them aware of the
stake sale and to say it did not intend to make a full bid.
ITV'S GOT TALENT
ITV, which began broadcasting in 1955 as Channel 3, is known
for airing "Britain's Got Talent" and "Downton Abbey".
The company, renowned for producing some of Britain's most
popular dramas in the 1980s and 1990s such as "Prime Suspect",
was hammered during the financial crisis as advertisers and
viewers deserted its TV channels.
It has since been rebuilt under Chief Executive Adam Crozier
by improving the quality of its programming and selling it
around the world, which helped non-advertising sources
contribute 44 percent of its revenue in 2013.
With shares up 6 percent at 195 pence, ITV had a market
valuation of 7.9 billion pounds. BSkyB sold the shares at 185
pence, up from Wednesday's close of 183.8 pence.
"ITV has a strong studios business (25 percent of profits)
with an international presence, and as such should command a
premium valuation and be of interest to international companies
expanding in content," UBS said.
"ITV is trading on 13.2 times 2015 expected earnings per
share versus the subsector on 14.3 times, an undeserved discount
in our view given the quality of the studios business, the
strength of the UK recovery and potential for M&A."
The stake sale brings an end to one of the most
controversial corporate moves in the British media sector - the
decision by James Murdoch, then BSkyB boss, to buy 17.9 percent
of the then struggling ITV to block rival NTL from creating a
larger, more powerful competitor.
The move in 2006 kicked off a long-running regulatory
investigation, which eventually forced BSkyB to reduce the stake
to 7.5 percent. BSkyB bought the shares in 2006 for 135 pence
each, sold more than 10 percent at 48.5 pence, a deep loss, and
sold the remainder at 185 pence.
NTL went on to become Virgin Media, which was then bought by
"This is an opportunistic and attractive investment for us
in our largest cable market," Mike Fries, Liberty Global's chief
executive said in a statement.
($1 = 0.5840 British Pounds)
(editing by Jason Neely and Jane Baird)