British cable operator NTL's pursuit of ITV took on several new twists last week as the United Kingdom's largest commercial broadcaster rejected its initial offer, less than a week after NTL rival British Sky Broadcasting was accused of trying to scuttle the deal by buying a 17.9% stake in ITV.
ITV rejected NTL's $8.9 billion offer last Tuesday in a statement to the London Stock Exchange, saying that the NTL offer materially undervalues ITV.
“The board believes that whereas there is obvious appeal to NTL in gaining control of ITV's substantial and successful business, from ITV's perspective there is little, if any, strategic logic for ITV to combine with NTL,” ITV said in the statement.
While NTL could still sweeten its bid, or back away altogether, it is the latest in what has been a contentious week for both companies. On Nov. 19, NTL's largest individual shareholder — Sir Richard Branson, who owns 10.5% of NTL — accused BSkyB of trying to block its deal with ITV by buying the stake. Branson called for British regulators to look into the BSkyB purchase. BSkyB announced on Nov. 17 that it had purchased 17.9% of ITV for about $1.8 billion.
Last Tuesday, Branson continued to pour on the heat, claiming ITV's rejection of its bid was the result of BSkyB's influence.
“BSkyB claims its investment in ITV will have no impact on the company's future direction,” Branson said in the statement. “It appears that this share purchase has already had a material influence on the company and damaged the plurality of the British media.”
Earlier in the week, Branson had called the BSkyB move a “blatant attempt to distort competition even further by blocking any attempt to create a strong and meaningful competitor.”
BSkyB — the largest pay TV provider in the U.K., with about 8.3 million subscribers to its direct-to-home satellite service — was largely thought to have made the move to keep ITV out if its main rival's hands. Any acquisition of ITV would require a 75% vote from the broadcaster's board, so while BSkyB's interest wouldn't prevent an NTL deal with ITV, it could make it more difficult.
ITV's rejection doesn't mean a deal is completely off. NTL can also look to other programmers, most notably RTL's Channel 5, a smaller U.K. broadcaster.
“Although NTL has few options left in partnering with ITV, we are not convinced that NTL has exhausted all its options,” Oppenheimer & Co. cable analyst Tom Eagan wrote in a research note.
NTL, the largest cable operator in the U.K. with about 3.3 million video customers, is attempting to make its third big acquisition in a year — on March 3, the company completed a $6 billion acquisition of No. 2 U.K cable operator Telewest Global, and on July 4, it completed the $1.1 billion purchase of Virgin Mobile.