Satellite M&A expected in 2014
The London stock exchange has seen a dramatic improvement in the share price of BSkyB over the past few days (up 33p on Jan 14 to £8.71) as speculation mounts that Rupert Murdoch might be planning another method of consolidating 21st Century Fox’s stake into either a ‘Sky Europe’ or perhaps seeing a merger between BSkyB and someone such as Vodafone.
Oddly, as fast as BSkyB’s share price was rising it seemed shareholder sentiment towards Sky Deutschland was falling. Sky Deutschland’s price has fallen back from €7.80 down to €7.30 during the first few days of the week.
The gossip has come from a UBS report to clients which rates BSkyB a ‘key call buy’. That isn’t necessarily the view from Sarah Simon at Berenberg Bank, which – despite praising last year’s performance from most of Europe’s broadcasters – is not quite so enthusiastic. “Broadcasters, the best performing sub-sector in 2013, look expensive to us,” Berenberg states, “and, with structural concerns also, we see vulnerability in this corner of the sector.”
“In pay-TV, for example, while Sky Deutschland was one of the best performing stocks in the broader universe, BSkyB was one of the worst. This reflected the very divergent competitive landscape within the two companies’ respective markets: in Germany the market responded positively to Sky Deutschland’s improved position versus the likes of Deutsche Telekom and the cable industry, and to the perceived benefits that this would bring in terms of customer growth and returns. In the UK, however, any doubts that BT was a serious competitor were swept away when the telco snatched the Champions League rights from BSkyB and ITV.”
However, Simon does talk positively about the satellite sector and specifically about the prospects for some merger & acquisition opportunities during 2014. She specifically cites Malaysia’s Measat and (formerly Bermuda-based) Asia Broadcast Satellite (ABS) as possible sales prospects, with the buying interest coming from any number of other international players. Arabsat is cited as one interested party, and it is widely known that Arabsat as well as Paris-based Eutelsat were involved in past discussions which came to nothing.
Berenberg’s rationale is that ABS, currently controlled by Permira and which took ownership in September 2010 “could look to exit once the ABS-2 satellite has been successfully launched (currently scheduled for next week, 23 January 2014).
Hong Kong-based AsiaSat is also in the bank’s sights. “In 2012 there was an attempt by (China’s) CITIC and General Electric to take the company private, but this was rejected, so there is certainly a history of corporate activity here as well,” adds the bank.
Also on the sales lot is Israel’s Spacecom, which is seeking either a new investor or sale. Arabsat recently bought Greece’s HellasSat, while Eutelsat has on December 31st wrapped its acquisition of Mexico’s Satmex.
As to potential major buyers for any of these orbital players, SES has funds available and has consistently said that it could be interested provided price and opportunity were sensible. Eutelsat, because of its recent Satmex purchase would need to raise fresh cash should it wish to pursue a deal. However, as the bank suggests, Eutelsat could raise around €300 million by selling off its minority stake in Hispasat. And of course any number of smaller players (not least Arabsat) could be looking to extend their fleet over Asia.