Sky can't lose with United, says City

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The Independent Online
THE CITY yesterday applauded British Sky Broadcasting's proposed takeover of Manchester United football club, arguing that the club offers Rupert Murdoch's satellite television group an "each-way bet' in the battle for television rights.

Investors shrugged off protests from angry fans and fears that the bid could be referred to the Monopolies and Mergers Commission and pushed up BSkyB shares up by 9p to 482p.

Analysts were even relatively sanguine about BSkyB's statement that the cash and shares bid, which values Manchester United at pounds 623.4m, would "modestly" dilute its earnings per share in the years ending 30 June 1999 and 2000.

"Some of the revenue streams after the year 2001 are very good," said one analyst, pointing to the probable level of demand for television rights outside the UK and the possible boost that a European Super League would provide.

Plans to boost the seating capacity at Manchester United's stadium, Old Trafford, are expected to add pounds 4m to annual revenues by the year 2002. Demand for Manchester United-branded merchandising from Far Eastern nations is also set to rise sharply.

The deal ensures that BSkyB will reap some of the benefit of the rising cost of television rights for football. "It's a classic each-way bet," one analyst said. "If they do a huge deal with the Premier League they at least get some of the cash coming straight back."

Manchester United shares jumped ahead by 15.5p, ending at 215.5p, as investors reacted to confirmation of BSkyB's planned to bid.

The broadcaster is offering 0.2537 new BSkyB shares and 120p in cash for each Manchester United share. At yesterday's closing prices, the offer is worth 242p per share. Martin Edwards, the Manchester United chief executive, will join the BSkyB board once the deal is completed.

Analysts said the reason Manchester United shares were trading at below the offer price was that some investors were worried that the deal could still be blocked. The Office of Fair Trading, which must recommend whether the deal should be referred to the Monopolies and Mergers Commission, is set to invite submissions in the next few days.

The OFT will then pass its recommendation to Peter Mandelson, the Secretary of State for Trade and Industry, who will make a decision on the referral to the MMC.

A large number of media groups and football clubs are likely to oppose the takeover and argue that the deal is anti-competitive.

Yesterday Lord Hollick, the Labour peer who is the chief executive of the television group United News & Media, and a special adviser to Mr Mandelson, said: "It's a coming together of pay and subscription TV in the UK, with what Murdoch himself called the `battering ram' of sport."

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