Reed to quit satellite TV with sale of 3.6% stake

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The Independent Online
REED Elsevier, the publishing giant that was one of the founders of British Sky Broadcasting, is trying to sell its 3.66 per cent stake in the satellite television venture for about pounds 100m.

The sale to three other shareholders, Pearson, Granada and the French group Chargeurs, is expected to be announced next week. It will be the first reliable indication of the worth of the venture, which City analysts have tentatively valued at anything between pounds 1.5bn and pounds 4bn.

Reed, Pearson, Granada and Chargeurs were founding investors in British Satellite Broadcasting, which merged with Rupert Murdoch's Sky in November 1990. However Reed said in May 1991 that it did not want to put any more money into BSkyB, and saw its holding diluted from 12 per cent to 3.66 per cent.

Peter Davis, chief executive of Reed, admitted yesterday that Reed was prepared to sell for less than the stake might be worth.

Frank Barlow, managing director of Pearson and chairman of BSkyB, said he would be 'very suprised' if the Reed deal was not agreed next week.

The indications are that Reed will receive between pounds 80m and pounds 100m for its stake, which also includes about pounds 30m worth of loan notes. This would imply BSkyB is worth about pounds 2bn, which is in line with valuations by the stockbrokers James Capel but below the price tag put on BSkyB by Reed's own adviser, SG Warburg, which says the venture is worth pounds 2.5bn.

Reed paid about pounds 85m for its holding in BSkyB, but has written off pounds 54m against the value of the equity stake on its balance sheet.

Mr Davis said the group was selling because the shareholders who guaranteed pounds 450m worth of BSkyB's debts in 1989 were being asked to renew their guarantees by the end of this month, and Reed did not wish to continue with its obligation.

Both Pearson and Granada sent circulars to their shareholders yesterday asking for permission to renew the bank guarantees. The documents include a consolidated profit and loss account and balance sheet for the year to 30 June 1992, the most up-to-date financial information yet released by BSkyB.

These show that the group made an operating loss before exceptional items and interest of pounds 47m. The pre-tax loss after interest was pounds 188m.

The balance sheet shows net current liabilities of pounds 383m and negative net worth of pounds 1.51bn, though these figures include all the unpaid interest to BSkyB's banks and shareholders.

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