U.K.’s Channel 5 Looking for First-Round Bids Thursday

LONDON – Discovery Communications and Haim Saban‘s Saban Capital are among the companies that have been looking at submitting first-round bids for Britain’s Channel 5.

Initial offers are due Thursday, but deadlines in such auctions can be somewhat flexible. The timetable beyond the first round of bids, designed to gauge the amount of interest, isn’t clear.

The current owner of the U.K. broadcaster is entrepreneur Richard Desmond‘s Northern & Shell, which acquired Channel 5 in 2010 for $171 million from European TV giant RTL Group, which is controlled by Bertelsmann.

Sources said that Desmond is now seeking $1.1 billion-plus (£700 million) for the network as Channel 5 has recently at times outperformed rival Channel 4. But at least one analyst said the company was unlikely to attract bids close to that level, at least not early on in the process.

Channel 5 airs such shows as the local version of Big Brother. It also recently acquired NCIS: Los Angeles for the U.K.

Companies that have been exploring possible bids include U.S. and U.K. network owners, as well as investors and British pay TV giants, according to sources. Discovery has been considering a joint bid with BSkyB, the Financial Times previously reported.

Saban has also looked at the asset, but he is seen as needing a strong strategic partner. “It would be hard for Saban to compete on his own” if a TV network company lines up a strong bid, one banker told THR.

NBCUniversal, which has said it would like to boost its international presence but now sees owner Comcast busy with its planned $45 billion takeover of Time Warner Cable, has also been named as a possible suitor for Channel 5 in the past. U.K. telecom giant BT, which has been competing more aggressively with BSkyB, also gets mentioned by analysts as a possible bidder.

Bankers for Channel 5 have also tried to get the attention of John Malone‘s Liberty Global, telecom giant Vodafone and others, according to one source. It wasn’t clear if any of them would join the auction.

Amid recent deals to expand in Europe via acquisitions of SBS in Scandinavia and a stake in pan-European sports network Eurosport, Discovery is widely seen here as a strong contender for Channel 5 if it chooses to pursue it, even though the company, like its peers, has declined to comment on its bidding plans.

“Discovery is a logical buyer because the focus of management has been abroad and they can leverage their sales force,” said Macquarie Securities analyst Amy Yong.

But she added that BSkyB’s participation in a major way, particularly as a sole bidder, was “unlikely.”

“Overall, we do not believe Channel 5 is strategic for BSkyB. It already has Pick TV (which airs mainly older BSkyB content) that gives it optionality in free-to-air TV,” said UBS analyst Polo Tang. “Rather, we think BSkyB is being opportunistic should Channel 5 come at a low price.”

Sanford C. Bernstein analyst Claudio Aspesi said Discovery and BSkyB could reach cost synergies in production and ad sales.

Saban Capital, meanwhile, could explore a possible merger of Channel 5 with Channel 4, according to the FT. But that would require regulatory approvals and other complications.

For BT, Channel 5 could also be of interest, said Liberum Capital analyst Ian Whittaker. “They could use [it] as a showcase for content and to attract customers to their services,” he said.

U.S. companies would see other benefits than British players, he explained. “It would give them a foothold in a market, which looks attractive if you are looking to sell VOD services and also build up links with production companies,” he said. After all, the U.K. is one key source of formats for U.S. TV companies.

E-mail: Georg.Szalai@THR.com
Twitter: @georgszalai