As widely expected, Scripps Networks is to acquire Virgin Media’s stake in UKTV, the joint-venture multi-platform channel operator with BBC Worldwide.
Scripps Networks Interactive will pay approximately £239 million to purchase Virgin Media’s 50 per cent common equity interest in the UKTV partnership and also will pay about £100 million to acquire the outstanding preferred stock and debt owed by UKTV to Virgin Media. Completion of the transaction is contingent on regulatory approvals in the Republic of Ireland and Jersey.
“UKTV is a significant opportunity for Scripps Networks Interactive to participate in a thriving multi-channel, dual revenue stream media business in one of the world’s largest television markets,” said Kenneth W Lowe, chairman, president and chief executive officer of Scripps Networks Interactive. “Making a solid investment in UKTV and entering into a strong partnership with BBC Worldwide reinforces our core international strategy which we believe will create significant long-term value for our shareholders.”
Related to the transaction, Scripps Networks Interactive and BBC Worldwide are negotiating an agreement whereby, after completion, BBC Worldwide would have the option, via a combination of cash and a package of digital rights for UKTV, to increase its shareholding from 50 per cent to a maximum of 60 per cent. Scripps Networks Interactive’s existing voting rights and Board representation would be unaffected by this proposed arrangement, which would be subject to BBC Executive and BBC Trust approvals.
Formed in 1997, UKTV attracts about 36 million viewers a month across its portfolio of 10 lifestyle, entertainment and non-fiction (factual) programming channels. UKTV brands include Home, Good Food, Dave, Watch, GOLD, Alibi, Eden, Blighty, Yesterday and Really. UKTV also operates complementary websites for each channel brand.
UKTV channels air award-winning shows from the BBC in addition to original programming. All of the UKTV channels are available on Sky Digital and Virgin Media. Dave and Yesterday also are available on Freeview.
John Smith, chief executive, BBC Worldwide, said: “The launch of UKTV in 1997 created a new secondary platform for content from the BBC and U.K. independents that has delivered great value back to all stakeholders. We thank Virgin Media for the part it has played in developing the business into one of the most successful pay TV companies in the U.K.”
“We welcome Scripps Networks Interactive as our new partner and look forward to working with them to open up further avenues to success. The new agreement we are developing will bring benefits to UKTV’s audiences in the way they can consume content and will help to sustain UKTV’s track record of growth. It will create the opportunity to drive further value from digital rights on behalf of our stakeholders, particularly our shareholder, the BBC.“
Neil Berkett, Virgin Media’s chief executive officer, said: “We are pleased to have reached this agreement with Scripps Networks Interactive. This will allow us to continue to focus on providing a transformative experience for our customers by developing our core strategic strength – the UK’s leading digital network – alongside our leading entertainment services.”
Confirmation of the deal comes just over a year after Virgin Media put its stake on the market, reportedly with a price tag of about £350 million, appointing UBS and Goldman Sachs to find a new owner. It had decided that the TV content business was “not a strategic investment” for company.
BBC Worldwide was at one stage considered the frontrunner to take full control as it had first refusal and could effectively exercise control over the buyer of Virgin’s stake.
In 2009, Channel 4 was involved in talks about buying the Virgin stake, as part of a wider commercial partnership with BBC Worldwide, although these eventually came to nothing.
Discovery Networks was also mooted as a potential buyer towards the end of 2010, until Scripps emerged as the frontrunner, before a dispute over a critical advertising sales contract is understood to have contributed to a hold-up in the sale in February. A number of issues including the state of the UKTV ad sales contract, which is held by Channel 4, were reported to be at the heart of the problem.
Scripps launched the Food Network in the UK and Europe in 2010, airing shows such as Nigella Express and Great British Menu, in partnership with Chello Zone.