BSKYB WILL hand out £1 billion (€1.14 billion) to placate investors who lost out when a phone-hacking and police corruption scandal forced News Corporation to drop its bid for the satellite broadcaster.
BSkyB, whose board on Thursday voted unanimously to keep the embattled James Murdoch as its chairman, will return £750 million to investors with a share buyback and a further £253 million via a 20 per cent boost to the final dividend.
News Corp agreed to take part in the buyback to prevent its stake from creeping above its current 39 per cent, BSkyB said yesterday. Any increase would have been politically contentious while the phone-hacking scandal hangs over the company.
“We view the share buyback announcement as positive, particularly given News Corp have agreed to participate,” one of BSkyB’s 10 largest shareholders said. “The £750 million quantum is sensible and allows a balanced approach between returning cash to shareholders while maintaining financial flexibility to pursue growth opportunities.”
BSkyB also released full-year results that beat expectations for sales and profits, though a slowdown in customer additions showed the impact of economic weakness and perhaps the fact that management attention had been focused on the failed bid.
Shares in BSkyB initially rose slightly on the news but closed down 0.6 per cent at 712p, broadly in line with the wider market.
“Ordinarily, one might expect a buyback of this size, equivalent to 7 per cent of share capital, to lead to both decent upgrades and a decent share price reaction,” said Alex DeGroote, media analyst at brokerage Panmure Gordon.
“Our sense is that Sky faces a challenging 2012.”
As well as being a consolation prize for investors and News Corp – which will make £390 million instead of the hoped-for consolidation of BSkyB’s cash flows – the move may signal a shift at BSkyB if growth begins to slow. “They may be more open to share buybacks, and that potentially helps News Corp,” said Liberum Capital analyst Ian Whittaker. – (Reuters)
