News Corp increases its stake in German pay-TV company

Rupert Murdoch’s News Corp tightened its grip on Sky Deutschland yesterday, saying it would raise its stake in the German pay-TV company to 54.5 per cent from just under half in a capital increase.

The move comes as media conglomerate News Corp separates its publishing and entertainment assets into two publicly traded companies following shareholder pressure to sell its troubled newspaper business and put a greater focus on the faster-growing TV companies.

It also follows an attempt in 2010 by News Corp to snap up the 61 per cent of BSkyB that it did not already own. That deal was eventually scuppered by the phone hacking scandal at one of Murdoch’s tabloid newspapers, but it indicated the group’s intentions around pay-TV. News Corp is hoping Sky Deutschland will turn out like BSkyB, which has amassed over 10 million customers and grown adept at selling increasing numbers of services to them.

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BSkyB posted a record full-year adjusted operating profit, up 14 per cent to £1.2bn in July, while Sky Deutschland has made a profit in only one year since it was founded in the early 1990s.

News Corp so far has invested about 1 billion euros in the business.

Under the plans revealed yesterday, News Corp will be able to consolidate Sky’s earnings in its own figures.

A person familiar with News Corp’s thinking said it could increase its holding further although it did not plan a full takeover for the group, which it believes has “significant market opportunities”. Under German law, News Corp is not required to make an offer for all outstanding shares.

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“We suspect this is to drive aggressive growth plans,” UBS analysts said.

Sky Deutschland said yesterday it was raising a gross 438 million euros ($584.5m) via a private placement with News Corp and a rights issue, more than three times as much as had been expected.