BBC Worldwide has eyes for Virgin TV business

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BBC Worldwide, the commercial arm of the BBC, wants to buy out Virgin Media's television business but will need private equity help to fund the deal, sources said Monday.

The move would be the division's most aggressive commercial step as it seeks to boost its global channel business and double profits over the next three years.

Financial sources confirmed that the BBC has invited as many as 10 private-equity houses — thought to include Cinven, KKR and Providence — to discuss partnering in a deal that could include all or part of Virgin Media's TV arm, which includes the U.K. Gold, Living, Trouble and Bravo brands.

BBC Worldwide and Virgin Media already are joint-venture partners in some of these channels. The total value of the group could be as much as $1.5 billion, according to estimates.

BBC Worldwide is restricted in its ability to borrow to fund acquisitions by BBC guidelines, so it would need a partner to help finance the deal.

Debt-burdened Virgin Media has seen the value of its channels business slide as carriage fees from BSkyB, its biggest customer, have been reduced.

Recently appointed CEO Neil Berkett also has decided to focus the business around high-speed Internet services and midrange television packages rather than go head-to-head with Sky in the television stakes. Its year-old digital cable channel Virgin One has yet to make an impact.

Analysts said there were good reasons for both sides to seek a deal.

"Virgin Media has instructed Goldman Sachs to conduct a review of its content business, and selling the business is one of the potential options," said Daniel Kerven, an analyst at UBS.

"The BBC is … in a strong position to acquire the stake and would allow it to regain full control over the exploitation of its programming library. The valuation of Virgin's wholly owned TV channels has been adversely impacted by lower carriage fees from Sky," he added.
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