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BSkyB takes helm at Open
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July 17, 2000: 8:40 a.m. ET
Pay-TV company buys majority in interactive j-v, paying more than $788M
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LONDON (CNNfn) - British Sky Broadcasting Group PLC agreed Monday to take control of Open, a joint venture providing interactive TV services, by buying out two of its partners for as much as £525 million ($788 million), gaining a provider of online shopping, games and email.
BSkyB, Europe's No. 2 pay-TV operator, is raising its stake in Open to 80.1 percent from 32.5 percent by buying a 20 percent stake from international bank HSBC Holdings and a 15 percent slice owned by Japanese electronics maker Matsushita, while it will also buy newly created shares. The companies didn't immediately say how much new stock was being created or the cost of the new shares to BSkyB.
The joint venture's fourth shareholder, British Telecommunications PLC (BT-A), has an option to sell the final slice of Open, a 19.9 percent stake, to BSkyB next year. It adds Open to its existing businesses of TV programming and distribution via satellite.
"Open has huge potential by working with new and old broadcasters, high-street stores, e-tailers and others," said Tony Ball, BSkyB's chief executive officer.
BSkyB agreed it would invest as much as £250 million in Open until its operations break even, which is expected within two years. By the end of June, British Interactive Broadcasting - the joint venture between the four shareholders which own Open - reported an annualized loss of £330 million, and generated revenue of £22 million.
BSkyB said the purchase would reduce its earnings per share before amortization and goodwill "for a number of years."
BSkyB shares rise
But investors weren't displeased by the details, driving shares of BSkyB (BSY) up 34 pence, or 2.6 percent, to 1,324 pence Monday afternoon.
Analyst Paul Richards at WestLB Panmure told Reuters that BSkyB got a good price.
"This shows the strength of BSkyB's negotiating power that it could agreed a deal valuing Open at £1.2 billion, or £1.5 billion if certain targets are met," Richards said. "I would have valued Open at a lot more."
BSkyB said it was buying a combined 35 percent stake from HSBC and Matsushita for £394 million in new BSkyB shares, and would pay them another £131 million in BSkyB stock if Open met certain performance targets.
Issuing new Open shares to BSkyB would dilute British Telecom's share in the joint venture to 19.9 percent from 32.5 percent at present, Open said. BT spokesman Simon Gordon said his company was willing to see its stake reduced in order to let BSkyB invest to increase the overall value of the venture.
Open started operating in October 1999, providing BSkyB's SkyDigital TV subscribers with secure home shopping and banking, interactive games and e-mail. Open owns the set-top decoding devices and telephone connections needed to get access to its service.
BSkyB said Open is the largest e-commerce platform in Britain with access to more than 9 million people through TVs in over 3.4 million homes. Analysts previously said they valued Open between £2.0 billion and £2.5 billion pounds. 
-- from staff and wire reports
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