BSkyB shares up on market rumors

Rupert Murdoch may take the company private

LONDON -- Shares in the News Corp.-backed satcaster BSkyB soared to a two-year high on market rumors that media mogul Rupert Murdoch plans to take the company private.

Shares in the satcaster traded up 5% in early trading to 597 pence ($9.04), reaching trading volumes more than double the average.

Analysts speculated that the move might be driven by the view that Sky's profitability is undervalued by the market, with some traders suggesting a price horizon of 735 pence ($10.12) for the 61% of the company News Corp. does not already own.

"It is plausible on the grounds that BSkyB has invested heavily and [we think]... profitability is going to rise very materially and that hasn't been reflected in the share price yet," said Numis Securities analyst Paul Richards.

But other analysts were less positive.

"It is not clear why News Corp. would want to do a deal now. News Corp. already has effective control and it could have acquired BSkyB in the past at a lower share price," said UBS analyst Polo Tang, nonetheless pointing out that News had about $8 billion in cash and was able to finance a deal.

"Separately, we believe News Corp. is likely to be more focused on smaller deals," Tang said in an investment note.

The satcaster has succeeded at bucking the recession that has hit other media stocks and is on track to reach 10 million subscribers by the end of 2010. Later this year it plans to launch 3D television services and said Friday it was building its HD channel business and would carry 50 HD channels later this year, following the launch of HD version of ITV1, Hallmark Channel and Sky Sports 4 by the year end.