BSkyB underlined its determination to make up lost ground in the online world yesterday when it bought Sports Internet Group (SIG) for £266m in shares.
Peter Wilkinson, the deputy chairman, who founded Planet Online and helped develop Freeserve, will receive £112m in BSkyB stock for his 42.3 per cent stake in SIG. Shareholders will receive 0.5622 new BSkyB shares for each SIG share, although Mr Wilkinson's undertaking to sell lapses if BSkyB stock closes below £11.75p for five consecutive days before the deal closes.
Plunging technology stocks and the amount paid for SIG saw investors flee BSkyB in droves, resulting in the evaporation of £3.1bn of market capitalisation as the shares fell 178p, 12 per cent, to 1,334p.
Analysts, who have been supportive of BSkyB chief executive Tony Ball's plans to invest in the Net, were sceptical about the price for SIG. One said: "Certainly from where I sit I'd say... that is expensive."
Mr Ball declined to comment yesterday as BSkyB put the finishing touches to its bid to renew English Premier League football TV rights. But BSkyB executives defended the deal, noting that it will advance the pay-TV broadcaster's internet development by a year.
"Sky digital is broadband," said a BSkyB executive. "[With SIG] we can create the virtuous circle between television and online. We are positioned to be the leading UK provider of online sports content." The deal gives BSkyB the Planet Football and Opta marques, which encompass 20 websites offering exclusive betting links, including tax-free offshore accounts. BSkyB will also get 49 per cent of Sports E-tail, an online merchandiser.
SIG claims 1.5 million unique users, visits generating 30 million page impressions per month and distribution relationships with Yahoo! and Freeserve. Mr Wilkinson and other SIG executives will stay on for an unspecified period to bolster skysports.com's management team and oversee development.
Confirmation of the deal coincided with BSkyB reporting a third-quarter pre-tax loss of £28.4m, after a profit of £16m in the year-ago period. Sky Digital continued to race ahead as satellite dish customers rose by a record 190,000 for January- March to 4.16 million.