It seems BSkyB has been screwed by the UK Government order that it cuts it’s 17.9% stake in ITV to less than 7.5%. This comes only a week after Labour supporter Richard Branson, a British tax exile, flew to China with Gordon Brown (British Prime Minister) and whose Virgin Group had been frustrated in his attempt to buy ITV.
The grounds cited were that the stake resulted in a substantial lessening of competition within the UK market for all television. It also enforced a ruling from the Competition Commission last month.
Two specific points of interest. Firstly, the ruling that 17.9% constitutes a “merger”, rather than an investment stake, which accounting rules traditionally consider it and which would have considerably ramifications if applied more widely. Secondly, ITV shares have almost halved in value since they were acquired by BSkyB and could be driven lower by an enforced sale, so they may have a reasonable claim for sizeable damages.
As it happens, since that same trip the Government have also announced an astoundingly generous offer to guarantee bonds issued by Northern Rock, which Virgin wants to buy. So perhaps Murdoch isn’t the only one who was screwed on the flight.