Yesterday, Scripps Networks Interactive Inc. (SNI) entered into a definitive agreement with Virgin Media Inc. (VMED) to acquire Virgin Media’s 50% stake in UKTV. UKTV is a 50-50 joint venture between Virgin Media and British Broadcasting Corp. According to the agreement, Scripps Networks will pay approximately GBP239 million ($390 million) to purchase Virgin Media’s equity interest in UKTV and will also pay another GBP 100 million ($163 million) to acquire the outstanding preferred stock and debt owed by UKTV to Virgin Media. The deal is subject to the regulatory approval of the Republic of Ireland and Jersey.
Virgin Media wanted to sell its UKTV stake as part of its strategy of disposing non-core assets to concentrate on its cable business. The money raised from the sale will be used to expand its high-speed broadband networks. Virgin Media revamped its business model as a pure-play service delivery and carrier company rather than a content provider. In July 2010, the company sold the Virgin Media TV business to British Sky Broadcasting for approximately $234 million.
Scripps Networks is alifestyle content programming developer. The companyis on a major expansion drive and is internationally taking stakes in numerous channels.Acquisition of the controlling stake in the Travel Channel has lifted Scripps Networks as the global market leader in lifestyle programming. The company now has three very powerful and completely distinct programming categories, namely home, food, and travel. Earlier, the company launched its Food Network programs in the U.K through Sky Network.
We believe the main reason for Scripps Networks’ initiative to acquire a stake in UKTV is that lot of channels of the former exactly matches with Scripps Networks’ core offerings. UKTV controls 10 TV channels offering lifestyle, entertainment, and non-fiction contents. The similarities between Scripps and UKTV include Lifestyle/Really, Food programming, Home & Gardens, Nature and Historical, beside UKTV’s other offerings like Comedy, General Entertainment, and Crime Drama.
UKTV has around 36 million viewers a month for its portfolio of channels and contributed approximately $11 million in net income to Virgin Media in the last quarter. Scripps is at present negotiating a deal with BBC through which BBC can raise its stake on the UKTV to a maximum 60%, if the proposed acquisition gets regulatory approval.
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