Sky share price up, agrees to sell Sky Bet to CVC

Sky Plc, Britains biggest pay-TV group, announced it has agreed to sell a controlling stake in its online gaming and betting unit to CVC Capital Partners as the company shifts focus to its television division in order to compete better against rival BT.

Sky, which also has operations in Italy, Ireland, Australia and Germany, said it will keep 20% of Sky Bet, while selling the rest to the private equity house CVC in an £800 million deal.

In line with the deal, Sky will receive £600 million upon closing and “further deferred and contingent consideration up to” £120 million, the company said.

Sky also said all employees would remain with the unit under the new ownership structure. The management team with its head Richard Flint
would also stay with Sky Bet, which wont change headquarters and remain in Leeds.

“This transaction will allow us to focus further on the substantial growth opportunities in our core international pay-TV business while realizing significant value for our shareholders,” said Skys CEO Jeremy Darroch.

After BT announced it is trying to acquire mobile operators EE or O2, Sky has to find a way to keep relevant in the industry and in order to do so it has hired investment bank Lazard to advise on the TV operators next move.

The value of the deal is equal of around 15 times its EBITDA during the past year ended June 30. Under the agreement Sky would retain “ongoing board representation”, while also entering a long-term licensing deal with CVC, so it can keep the name Sky Bet.

Sky Bet, formed in 2001 and currently operating in a range of sports, betting and gaming services, reported a full-year revenue of £183 million for the recent period, the performance was 18% up versus its 2013s results.

“We are delighted to have agreed to acquire a controlling stake in Sky Bet,” said Rob Lucas, managing partner of CVC “The partnership between CVC and Sky will provide a strong platform to support SkyBets ongoing success at this exciting point in its development.”

This is the latest CVC attempt to acquire a betting service, last year the private equity group showed interest in Befair, however, no agreement was reached.

CVC was advised by OC&C Strategy Consultants, while Sky was advised by Goldman Sachs on the agreement, which is expected to close in the first quarter of 2015, however, it still requires to be approved by UK and Ireland regulators first.

Sky Plc lost 0.11% on Wednesday and closed at GBX 927.00 in London. On Thursday the stock gained 1.02% to trade at GBX 936.50 at 10:13 GMT, marking a one-year increase of 19.30%. The company is valued at £15.94 billion. According to the Financial Times, the 21 analysts offering 12-month price targets for Sky Plc have a median target of GBX 965.00, with a high estimate of GBX 1 170 and a low estimate of GBX 610 00. The median estimate represents a 4.10% increase from the last close price of GBX 927.00.