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Sky Has No Limit

12 May 2014 by HCM

If you have watched Saturday’s Eurovision song contest, you are certainly doubting the merits of European integration when it comes down to entertainment. Mr Ruppert Murdoch was certainly looking beyond that when he decided to consider merging BSkyB with the Pay-TV units of Fox in Germany and Italy. The idea is to transform BSkyB into a European TV giant, while leaving US based 21st Century Fox focused on entertainment programming. There was little concrete information regarding how the transaction could be structured or how this €10bln deal would be financed, but the leverage will increase compared with the current 1.2x, even if BSkyB’s stake in ITV were to be sold. In any case, investors did not wait long and the 5 year risk premium of BSkyB was marked 27.5bps wider at 79.5bps and could be heading towards 100bps if the deal proceeds, as a high yield rating is not ruled out.