Sky TV shares surge on takeover talk

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Sky TV shares were up 9 per cent to $2.69 in early trading.

The jump followed a report earlier this morning that two private equity funds have been encouraged to take a look at Sky, with an eye on a $500 million buyout - or around a 16 per cent premium on its Monday close.

The funds were approached by bankers acting on Sky's behalf, according to the AFR. They were offered a look at the pay-TV provider's books if interested.

In a May 20 NZX filing, Sky hinted something was in the works, stating, "In the context of the previously referenced review of investment opportunities, Sky advises it is deferring any further update on strategy and capital allocation until the presentation of the company's full-year results in August."

On June 29 last year, Sky said it had appointed investment bank Jarden to advise it on a range of "unsolicited approaches".

Chairman Philip Bowman told an investor day virtual audience: "Over the last 12 months Sky has received a number of unsolicited approaches around potential transactions, all of which have been highly conditional and incomplete."

Sky made no NZX filing this morning. A spokeswoman told the Herald: "We don't comment on speculation. We're comfortable that we are in compliance with our continuous disclosure obligations."

Sky shares, which had a 10:1 consolidation last August, closed yesterday at $2.47, for a $431 million market cap.

Last year, Sky was profitable and achieved its first revenue growth since 2016 as gains from its streaming services out-stripped losses from its traditional satellite business for the first time. The firm is now set to return its long-suspended dividend in September with a profit payout equivalent to 50 to 80 per cent of free cash flow, according to Bowman.

The past year has seen Sky launch a broadband service provisioned by Orcon Group (set to finalise its merger with 2degrees this week), sell its Mt Wellington campus, seized back Premier League rights from Spark Sport and preview a new box, due for its initial rollout with weeks, which will work over UFB fibre and offer ultra high definition video plus apps like Netflix, Amazon's Prime Video and Disney+ as Sky seeks to become a one-to-shop for accessing a fragmented content market.

While still some distance from their heyday, Sky shares have risen 43 per cent over the past year.