Why does Sky want to buy ITV’s television business?

ITV has said it is in talks over a roughly £1.6 billion deal to sell its television business to Sky.

A deal would make Sky the UK’s largest commercial broadcaster.

Shares in ITV – which broadcasts shows such as I’m A Celebrity… Get Me Out Of Here! and Love Island – shot higher on Friday as a result.

– What has been announced?

Late on Thursday evening, Bloomberg reported that Sky owner Comcast was holding discussions with ITV over a possible deal to buy the public service broadcaster’s media and entertainment arm.

On Friday morning, ITV confirmed the “preliminary” talks in a statement to the London Stock Exchange.

It added that the division was being valued at around £1.6 billion, including debts, as part of the talks.

– What might happen next?

ITV stressed that talks are still at an early stage and there is therefore uncertainty over whether a deal will be agreed.

The company said: “There can be no certainty as to the terms upon which any potential sale may be agreed or whether any transaction will take place.

“A further announcement will be made in due course if appropriate.”

Nevertheless, any potential deal would then face regulatory scrutiny before it could be completed.

– Who currently owns ITV?

ITV is a publicly listed company on the London Stock Exchange, with a raft of different investors.

This includes a large number of investment firms, including Redwheel, which is the largest single shareholder, with a 6% stake.

International media firm Liberty Global had been the top shareholder until only last month, when it cut its stake in half to around 5%, in a move which secured it £135 million.

– Who currently owns Sky?

London-based Sky is owned by US media giant Comcast, which also owns NBC and Universal Pictures.

Comcast bought the business from Rupert Murdoch for £30 billion in 2018, outbidding 20th Century Fox in the process.

– Which parts of ITV would be included in a deal?

The takeover talks specifically relate to ITV’s media and entertainment arm, which includes its terrestrial TV channels and streaming service ITVX.

It is understood Sky is also expected to take over ITV’s 40% stake in the ITN business which makes news programmes for ITV and Channel 4.

However, ITV regional news is made in house and would therefore be included in a deal.

The sale would not include ITV’s production arm, ITV Studios, which makes shows including Coronation Street, I’m A Celebrity… and the popular drama Mr Bates vs The Post Office, which has also been the subject of previous sale speculation.

– Why would Sky want to buy the business?

ITV is the UK’s oldest and largest commercial terrestrial television network, as well as running digital channels and a major streaming platform.

A deal would therefore significantly boost Sky’s access to UK viewers, outside its current pay-to-view platforms.

If a deal was completed, it would also give Sky a very dominant position in the UK’s TV advertising market, giving it a strong position in contract discussions.

– Why might ITV be interested in a sale deal?

The talks come after a period in which ITV shares have slipped in value, hitting their lowest level since April earlier this week.

Shareholders responded positively on Friday, indicating that they may see a sale of the division as an opportunity to secure value despite wider pressures in the broadcasting market.

Dan Coatsworth, head of markets at AJ Bell, said: “The fact the media and entertainment arm has attracted a suitor, rather than Studios, is a surprise.

“There was a lot of uncertainty over whether anyone would want to relieve ITV of this ball and chain, so to see interest from Sky is Christmas come early for management and shareholders.”

– What could it mean for customers and viewers?

In any deal, it is expected that ITV would still be required to operate as a free-to-view terrestrial TV channel, while Sky would be expected to maintain its current pay-to-view model.

However, analysts have suggested that viewers might see a “cross-pollination” in content between the broadcasters, with it likely to have a particular impact on streaming.

Gill Hind, managing director and director of TV at Enders Analysis, told the PA news agency: “ITVX is growing but is still behind iPlayer and Channel 4 in terms of how many of the channels’ viewers use the streaming service.

“There could definitely be streamlining crossover opportunities with Sky able to make their programmes available to ITVX users who wouldn’t usually access their shows.”

She added that there could also be some impact on sports coverage, as it would likely seek to share rights across its public and paid-for channels.

– Will regulators allow a deal to take place?

The simple answer is that nobody knows, but the deal is very likely to face some form of investigation by regulators.

Media regulator Ofcom and competition regulator, the Competition and Markets Authority (CMA), are both likely to look at a potential deal.

The combined group’s potential dominance in the TV advertising space is expected to be a particular focus on any regulatory process.

It is understood that the combined business would cover around 70% of all UK broadcast advertising.

However, Ms Hind said the potential concerns over this could be linked to “whether regulators include the likes YouTube, Google and Meta in their ad market considerations”.