BSkyB is to create a pan-European broadcaster after agreeing to pay £4.9bn to take over Rupert Murdoch’s Sky Germany and Sky Italia.
The pay TV giant announced the merger in its annual results which showed a slight decline in pre-tax profits to £1.2bn from the £1.26bn achieved last year, helped by 7 per cent revenue growth at BSkyB.
Media mogul Murdoch owns a 39 per cent stake in BSkyB through 21st Century Fox, which also owns 100 per cent of Sky Italia and 57 per cent of Sky Germany.
By selling both to BSkyB Murdoch is aiming to get his hands on enough cash to help finance his takeover of Time Warner.
BSkyB currently caters for some 10m UK customers but thus deal would double that figure to 20m throughout Europe, whilst also saving it £200m in efficiency savings.
Jeremy Darroch, BSkyB's chief executive, said: "This transaction will create a world-class, multinational pay TV business with enhanced headroom for growth and immediate benefits of scale. The three Sky businesses are leaders in their home markets and will be even stronger together. By creating the new Sky, we will be able to use our collective strengths and expertise to serve customers better, grow faster and enhance returns.”
Despite this BSkyB’s shares dropped 4 per cent on the news as analysts fretted over increased debt and an end to the practice of buying back shares.