Conclusion
Inquiry conclusions on Sky's ITV stake are expected soon
John Hutton, the Business and Enterprise Secretary, is expected to publish within the next week the Competition Commission’s conclusions from its inquiry into the legitimacy of BSkyB’s shareholding in ITV.
Mr Hutton is expected to hold back from issuing his own ruling — the final verdict — until January. However, publishing the commission’s conclusions in advance puts him under pressure to endorse them.
Coming to a separate conclusion would risk a political and regulatory dispute. One source close to the inquiry said: “If Mr Hutton wanted to come up with his own conclusions, it’s a bit easier to do so if he hasn’t made the regulator’s own views public first.”
Mr Hutton can reject any penalty on Sky proposed by the commission, but is bound to accept the regulator’s in-principle findings — as long as they are purely on competition grounds.
Yesterday, the commission inquiry team met to consider the case. It will now finalise its report in the hope of delivering it to Mr Hutton this week. The regulator is expected to repeat its provisional conclusion that Sky’s 17.9 per cent ITV stake is too high and in breach of competition law. Mr Hutton then has up to 30 days before he publishes the commission’s report. The Department for Business indicated yesterday that he would seek to get the document published as soon as practical, and before his final verdict.
In October, the commission concluded that Sky’s seizure of a 17.9 per cent stake in ITV was “against the public interest” and said that it was minded to ask the satellite broadcaster to sell some or all of the holding. Sky is 39.1 per cent owned by News Corporation, parent company of The Times.
The level to which the commission wants Sky to sell down is not clear. ITV has told it that it believes Sky should sell all its stake, or at least trim it to 4.9 per cent, although more recent comments by Michael Grade, ITV’s chairman, indicate that ITV could live with 9.9 per cent. Sky has said that it was willing to put a 3.9 per cent holding into an independent trust.
The commission’s concern rests on the fact that Sky could have the power to vote down special resolutions called by ITV as part of major deals. Special resolutions require 75 per cent support and, since not all shareholders vote, Sky’s 17.9 per cent stake could effectively amount to a blocking minority.
A forced sale of all its stake would require Sky to crystallise a loss of about £240 million, given the fall in ITV’s shares since Sky bought its stake, although the satellite company would be likely to be given time to sell. It is not clear whether Sky would have grounds for a legal challenge, given that its acquisition respected the 20 per cent ceiling set by current law.
(Published by Times Online, December 12, 2007)
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