SKY LONDON (Reuters) - British pay-TV group BSkyB (>> British Sky Broadcasting Group plc) is to own a bigger-than-expected 87 percent of Sky Deutschland (>> Sky Deutschland AG) once its takeover closes, increasing its leverage but also its future earning power from European expansion.
Britain's dominant pay-TV provider agreed in June to pay $9 billion (5.63 billion pounds) for Rupert Murdoch's 57-percent stake in Sky Deutschland and all of Sky Italia to create a media company with 20 million customers.
Under stock market rules, BSkyB extended its 6.75 euros per share offer for the German business to other shareholders. But the bid was pitched at a small premium to Sky Deutschland's price before the deal and the British company had said it was happy to only take the 57-percent stake.
Citi analysts said the higher than expected take up would increase leverage and force down short-term earnings, but it would also result in higher accretion in future years. BSkyB has said it has the funding in place to complete the deal, regardless of how many investors take up the offer.
"Although the higher level of take-up inevitably means more leverage and a higher level of dilution near-term, we are broadly ambivalent about the level of take-up given the financing is in place and our constructive view on Sky Deutschland and the broader Sky Europe deal," they said.
BSkyB has decided its future growth lies in creating a European pay-TV leader that will operate in Britain, Ireland, Germany, Austria and Italy, after encountering the toughest market conditions in its 25-year history.
Having seen off a string of challengers to dominate its home market, BSkyB, which is in more than 10 million homes in Britain and Ireland, is now betting that the time is right to enter two European markets where pay-TV is not yet as popular or profitable.
(Reporting by Kate Holton; editing by Sarah Young)
