Kirch rejects BSkyB's attempt to exercise put option

Kirch has rejected BSkyB's attempt to exercise an option to sell its stake in the insolvent KirchPayTV business back to the stricken German media group.

In a surprise twist, Taurus Holding, Kirch's umbrella holding company, yesterday disputed Sky's claim that the conditions existed to trigger an early use of the put option. The move by Sky, the satellite TV group controlled by Rupert Murdoch, had pushed Kirch closer to complete collapse.

Sky, which bought the 22 per cent stake in December 1999 and had a right to sell it back from this October, said it wanted to sell the shares to Taurus earlier than expected because of "certain circumstances" without elaborating.

It was feared this could bring down one of the final remaining pieces of the collapsing Kirch empire. The company's main rights and broadcasting unit and its pay-TV business have already filed for insolvency.

Industry sources said Sky believed the insolvency filing of KirchPayTV on 8 May gave it the right to sell before 1 October, while media reports pointed to breach of banking agreements and failure to hit operating targets.

Sky, which is 36 per cent-owned by Mr Murdoch's News Corp, said it believed the put option was could still be exercised and would continue to take such action "from time to time" as it saw fit in order to seek best value of the put option. Sky said it was "unlikely to receive a significant amount, if any" as a result of its exercise of the option. Sky had previously said the option was worth €1.3bn (£823m).

Sky shares dropped 2 per cent on the news – or 15p – to 729p. It has already written off almost £1bn of its investment in KirchPayTV.

KirchMedia, Kirch's core media rights and television unit, is already in the hands of administrators as the group, built up over nearly 50 years by Leo Kirch, comes apart at the seams under the weight of billions of euros of debt and other liabilities.

Taurus is the holding company that spans KirchMedia, KirchPayTV and KirchBeteiligung, whose main assets are a 40 per cent stake in publisher Axel Springer and a controlling stake in the Formula One motor racing business.

KirchPayTV filed for insolvency after failing to renegotiate costly film and sports contracts or find fresh funds for its operations.