BSkyB offers $258 mil for Virgin channels

Bid said to be at least 60% more than bids from others

LONDON -- BSkyB has reportedly made a "knock-out" £160 million ($258 million) bid for arch-rival Virgin Media's digital channels business, coming in about 60% higher than bidders including Channel 4, Time Warner, RTL and NBC Universal.

Citing people close to the talks, the Financial Times said Friday that Sky's bid for seven digital channels including Virgin1, Living, Challenge and Bravo, would value it well ahead of competitors or analysts.

The reported development creates a dilemma for cable group Virgin Media, which is struggling to pay down its £5.9 billion ($9.5 billion) debt. The two companies have been bitter rivals, and Virgin may fear its cable TV business will be damaged by future carriage fees Sky might impose.

Other sources have speculated that Sky may not be able to secure the deal for regulatory reasons, but may simply seek to bid up the prices its rivals may eventually have to pay.

Analysts said the deal could deliver cost savings. "In our view, Sky is best placed to value the (Virgin Media) channels given that it controls a large part of their revenues through its satellite distribution agreement (whereas other bidders would not have visibility on its renewal)," UBS analyst Daniel Kerven said in an investment note.

"While the move is likely to be partly defensive to secure access to Virgin Media TV, Sky would also benefit from cost savings and revenue synergies from the consolidation of sales houses," he added.

Virgin Media and BSkyB declined comment Friday.