ITV Plc (LON:ITV) has agreed to sell its Media and Entertainment business to Sky for a total consideration of up to £1.6 billion, subject to customary closing adjustments.
Transaction Highlights
· Sale of the ITV Media and Entertainment business to Sky for a total consideration of up to £1.6 billion, comprising:
o £1.2 billion initial cash consideration, payable at completion subject to customary closing adjustments
o Contribution of Sky’s Love Productions business, for an agreed enterprise value of £200 million
o Contingent cash consideration of up to £200 million, payable in H2 2028, subject to Total Advertising Revenue (“TAR”) performance in FY 2027 and certain trading balance adjustments
· Enables a significant cash return to shareholders of around £950 million (25p per share), excluding any contingent consideration
· Unlocks value of ITV Studios, which will be a distinctive pure-play global content business, delivering above-market profitable organic revenue growth over the medium term, underpinned by:
o A long-term strategic partnership with ITV M&E and Sky, including a content supply agreement with a minimum spend commitment of £2.1 billion over 2028-32
o The addition of Love Productions (maker of the Great British Bake Off) – enhancing creative capabilities and portfolio breadth
o A robust financial model with strong cash generation supporting continued growth investment, attractive shareholder returns and an investment grade balance sheet
· Combination of ITV M&E and Sky creates a scaled UK media and entertainment company, supporting investment in content, technology and the UK creative industries:
o Viewers’ favourite shows will continue to be freely available
o All of ITV’s PSB commitments, including nations, regional and national news, are safeguarded under the terms of the Channel 3 Licences, which Sky is acquiring as part of the Transaction
· The Transaction is expected to complete in H2 2027
Andrew Cosslett, Chairman, ITV plc, said:
“For over seven decades, ITV has played an important and cherished role in the public life of the Nation. At a time of rapid change in the industry, it is right that we now secure ITV’s crucial role as a Public Service Broadcaster and this transaction achieves this with ITV’s Media and Entertainment division combining with Sky to create a UK champion with the scale and resources to better compete with global streaming platforms.
At a headline value of up to £1.6bn, the sale of ITV’s M&E division will deliver a significant cash return to shareholders. Crucially, the transaction also unlocks the value of ITV Studios which post completion will be a distinctive pure-play global content business, with a strong track record of success and excellent prospects, further underpinned by a long-term partnership with ITV M&E and Sky.”
Carolyn McCall (DBE), Chief Executive Officer, ITV plc, said:
“ITV has successfully evolved in a rapidly changing media landscape – launching, and scaling, ITVX and developing ITV Studios into a major force in the global content market. This transaction builds on that momentum to deliver clear, tangible value for shareholders.
At the same time, through the commitments made by Sky, the combined ITV M&E / Sky business will continue to deliver everything about ITV that our viewers and advertisers love and value and our people are hugely proud of – making programmes that reflect and shape society, bringing people together for shared experiences and having the quality, diversity and plurality that are the hallmarks of our contribution to the UK’s creative industries. In addition, all of ITV’s PSB commitments, including nations, regional and national news, are safeguarded under the terms of the Channel 3 Licences until 2034, which Sky is acquiring as part of the Transaction.
I am confident that Sky will be a strong and responsible custodian of ITV M&E, building on its heritage while investing in its future and safeguarding the qualities that make ITV so valued by viewers, advertisers and the UK’s creative industries.
Looking ahead, ITV Studios will be well positioned to deliver long-term value to its shareholders through a combination of above-market profitable organic revenue growth and attractive returns to shareholders. This is driven by its world class talent, global scale and a unique IP library, and further supported by a long-term strategic partnership with ITV M&E and Sky, including a £2.1 billion minimum spend commitment.
The value this transaction creates reflects a huge amount of hard work and the successful execution of our strategy and I would like to thank all our colleagues for their hard work, focus and commitment.”
Dana Strong (CBE), Group Chief Executive Officer, Sky, said:
“This is a defining moment for British media and an opportunity to build a stronger future for two of the UK’s most loved and trusted brands. We have huge respect for the transformation the ITV team has delivered, particularly its successful move into streaming through ITVX, which has brought fantastic British content to millions of viewers across the UK.
Bringing Sky and ITV Media & Entertainment together combines the very best of free-to-air television, pay TV and streaming, ensuring viewers across the UK continue to enjoy outstanding British programming in a rapidly changing world.
ITV will remain a public service broadcaster at the heart of British life, and we’re excited about the future we can build together.”
Transaction Summary
ITV has reached an agreement to sell its Media and Entertainment business to Sky, a wholly owned subsidiary of Comcast, for a total consideration of up to £1.6 billion, subject to customary closing adjustments. Following Comcast’s planned separation, Sky and ITV’s M&E business are expected to form part of NBCUniversal upon completion of both transactions.
At completion of the Transaction, ITV will receive a base consideration of £1.4 billion, comprising £1.2 billion in cash (upon which no tax is payable and is subject to customary closing adjustments) and the contribution of Sky’s wholly owned Love Productions business, valued at £200 million on a cash-and debt-free basis. In addition, ITV may receive contingent cash consideration of up to £200 million, payable if ITV’s total advertising revenue exceeds £1.7bn for FY 2027[1], subject to certain trading balance adjustments. The contingent consideration is subject to UK corporation tax.
Crucially, the transaction also unlocks the value of ITV Studios that post completion will be a distinctive pure-play global content business with a listing in London.
To unlock this value, ITV plc will be separating a business that has been integrated for decades, which is a complex exercise. As a result, ITV will incur transaction and separation costs of c.£185 million gross or c.£155 million net of tax, to be incurred over the next three to four years. Therefore, net cash proceeds are expected to be approximately £1.05 billion, excluding any contingent consideration. Proceeds will first be used to de-lever ITV Studios to c.1.5x net debt to EBITDA post completion. The Board then expects to return around £950 million to ITV shareholders following completion (c.90% of net cash proceeds, equivalent to 25p per share), excluding any contingent proceeds. The mechanics of the Capital Return will be announced in due course.
At completion of the Transaction, ITV Studios will enter into a long-term Content Supply Agreement with ITV M&E and Sky, covering key programmes and genres such as Coronation Street, Emmerdale, Love Island, I’m a Celebrity…Get Me Out of Here! and Daytime. This is a long-term strategic partnership which includes a minimum spend commitment of £2.1 billion over 2028-2032, providing revenue visibility for ITV Studios.
The Transaction is subject to regulatory approvals and other customary conditions, with completion expected in H2 2027. The preparations for separation are progressing well and until completion, ITV will continue to operate both ITV M&E and ITV Studios in the ordinary course.
After separation, ITV Studios will incur around £25 million of stranded costs per annum, which will be broadly offset by the contribution of Love Productions profit.
Strategic rationale and benefits of the Transaction
Following completion, ITV Studios will operate as a distinctive pure-play global content business producing and distributing content to audiences worldwide. ITV Studios is underpinned by three core competitive advantages: world-class creative talent, global scale and distribution capabilities, and a unique portfolio of IP.
These competitive advantages will be further strengthened by a long-term strategic partnership which includes the content supply agreement with ITV M&E and Sky, providing good revenue visibility. The addition of Love Productions will also enhance the business’ creative and IP capabilities.
Supported by these foundations, ITV Studios will have an attractive financial profile characterised by above-market profitable organic revenue growth, margins in the 13-15% adjusted EBITA range, and strong cash generation with profit to cash conversion[2] of approximately 80% on average. This provides the flexibility to reinvest for growth while delivering attractive, sustainable returns to shareholders
ITV Studios’ financial profile underpins its value creation strategy:
1. Organic investment to deliver growth and strengthen the business
2. Investment grade metrics over medium term, with ITV Studios operating at c.1.5x net debt to EBITDA post completion
3. Attractive dividend
4. Value accretive bolt-on M&A building on successful track record, assessed against strict financial and strategic criteria
5. Surplus cash returned to shareholders
ITV Studios plans to hold a Capital Markets Day before completion of the Transaction, where management will provide further detail on the company’s strategy, financial performance and medium-term outlook as a standalone business following completion of the Transaction. ITV Group’s dividend policy will remain unchanged in the period to completion.
The Board of ITV believes the terms of the Transaction represent an attractive outcome for shareholders:
· The implied ITV M&E enterprise value reflects its long-term growth prospects and profitability, including the continued strong growth in digital revenues through its leading ITVX platform
· The enterprise value of £1.4 to £1.6 billion implies an acquisition multiple of approximately
5.6-6.4x 2025A EV/EBITDA[3], in line with precedent transactions in the sector
· The upfront cash proceeds enable a meaningful Capital Return to ITV shareholders
· The contribution of Love Productions enhances ITV Studios’ creative capabilities, particularly in unscripted formats, and adds valuable IP to ITV Studios’ content portfolio. Love Productions is the producer of established long-running and returning hit shows and formats, including the Great British Bake Off and The Piano. The implied multiple of c.8x EBITDA, based on c.£24m of EBITDA (FY24), represents an attractive valuation multiple relative to precedent content transactions of similar scale.
The combination of ITV M&E and Sky creates a scaled UK media and entertainment business with a significant content budget, strengthening investment in British creativity and reinforcing the UK’s competitive position in global content production.
As part of a broader platform with a diverse portfolio of media and technology assets, the combined business brings together ITV’s free-to-air strengths, Sky’s pay-TV capabilities and advanced technology infrastructure. This enhances the experience for viewers through a wide range of entertainment across free and paid platforms, while advertisers continue to benefit from association with trusted, high-quality British programming and a commitment to responsible, impartial content. The combined business will have the resources and technology capabilities to compete more effectively with global media and technology companies in the UK, creating a scaled alternative UK platform for advertisers.
Board opinion
On the basis of the above, the Board has approved the Transaction and believes the terms of the Transaction to be in the best interests of ITV and ITV’s shareholders.
Financial effects of the Transaction and use of proceeds
After transaction and separation costs of c.£185 million or c.£155 million net of tax (to be incurred over the next three to four years), net cash proceeds are expected to be approximately £1.05 billion (excluding any contingent consideration). Proceeds will first be used to de-lever ITV Studios to c.1.5x net debt to EBITDA post-completion. The Board then expects to return around £950 million to ITV shareholders following completion. In addition, £65 million will be put into escrow for the benefit of the ITV Pension Scheme (see Appendix 3 for more details).
The transaction and separation costs incurred relate primarily to operational separation, other transaction expenses and CMA-related work. Of the gross transaction and separation costs of c.£185 million, c.£165 million is expected prior to completion, and the remainder over the subsequent two to three years as transitional service arrangements are unwound.
Following completion, ITV’s financial profile will reflect:
· ITV foregoing the earnings generated by the ITV M&E business, as well as the assets and liabilities associated with ITV M&E (see Appendix 2 for key financial information relating to the Transaction)
· Inclusion of Love Productions (£75 million revenue, £24 million EBITDA in FY2024)
· Removal of sports production revenue (c.£50 million in FY2025)
· Elimination of intra-group revenues derived from trading between ITV Studios and our distribution business Global Partnerships (£89 million in FY2025)
Studios financial guidance incorporates these changes and stranded costs of approximately £25 million, which will be broadly offset by the contribution of Love Productions profit.
Current Trading
Our expectations for the current year remain unchanged. As in previous years, Studios growth and margin are weighted towards H2. For M&E, we expect TAR to be up around 8% in Q2, with a strong July ahead and full Q3 guidance to be provided at Interim Results.
ITV’s Public Service Broadcasting Commitments
In 2024 ITV committed to a ten-year renewal of its Public Service Broadcasting (PSB) licences until 2034, which ensures that important programmes, including nations, regions and national news, current affairs, and diverse, high-quality UK content at prime time remain available to everyone nationwide for free. Sky has pledged to continue to deliver the PSB licences until expiry in 2034 including all of ITV’s PSB licence obligations. Further details relating to ITV’s PSB licences are included in Appendix 4 of this announcement.
UK Listing Rules
Due to the size of the Transaction in relation to the Group, it constitutes a Significant Transaction for the purposes of the UK Listing Rules made by the Financial Conduct Authority for the purposes of Part VI of the Financial Servies and Markets Act 2000 (as amended) and is therefore notifiable in accordance with UKLR 7.3.1R and 7.3.2R. In accordance with the UKLRs, the Transaction is not subject to shareholder approval.
Advisers
In connection with the Transaction, Evercore and Morgan Stanley are acting as Lead Financial Advisers to ITV. Goldman Sachs is also acting as Financial Adviser to ITV. Morgan Stanley and Goldman Sachs are also Corporate Broker to ITV. Freshfields are acting as Legal Adviser and FGS Global is Financial Communications Adviser to ITV.
Investor and Analyst Presentation
ITV will be holding a virtual presentation and Q&A session for investors and analysts at 8.30am today (BST) via the following link: https://www.investis-live.com/itv/6a4792b39f22d3000ee320ad/ergew
You can now pre-register to join.
If you would like to ask a question, you can use the following Conference Call details:
Operator Assisted Dial-In for Q&A:
United Kingdom (Local): +44 20 3936 2999
United Kingdom (Toll-Free): +44 808 189 0158
Global Dial-In Numbers
Access Code: 018412.
A copy of this announcement is also available on ITV’s website at www.itv.com.
