Thu, 01 May 2014 | BUSINESS SALE
Richard Desmond is due to announce the sale of Channel 5 to the US media group that owns MTV.
The deal, which is expected to be announced by the US company Viacom later today (Thursday 1 May), has been estimated to have cost as much as £450 million. The US broadcaster, that will unveil the purchase as part of its latest financial results, is reportedly buying Channel 5 as part of a planned assault on the UK’s free-to-air television market.
Viacom owns MTV, Nickelodeon and Comedy Central. The company’s controller Sumner Redstone has already dabbled in the UK market by creating original TV shows such as Geordie Shore and Peppa Pig.
Rupert Murdoch’s BSkyB runs all of Viacom’s advertising in the UK and as such the deal is expected to have a knock-on effect on the company.
As well as Channel 5, Richard Desmond owns the Daily Express newspaper and the Health Lottery. While he had been hoping to secure a sale for Channel 5 of something in the region of £700 million, it has been touted that the agreed figure was well below that. Nevertheless, a sale price of roughly £450 million would still mark a significant return for the 62-year-old businessman who bought the channel for just £103.5 million from German broadcaster RTL in 2010.
Channel 5 has six channels: Channel 5, 5*, 5 US, and three one-hour-later variants for each of these. The broadcaster beat Channel 4 for a share of viewers and is anticipated to report operating profits of £70 million this year.
Neither Viacom nor Northern & Shell, Channel 5's parent company, have commented on the deal yet.
However, Chris Beer, Professor of Practice at Warwick Business School, has said: "This is looks to be a good deal for both parties. Richard Desmond gets a great return on investment - I don't think the £700m was ever really on. Plus he gets to exit ahead of the potential loss of the Big Brother rights.
"Viacom on the other hand get access to a large free-to-view audience, a larger platform for their content, with the inevitable benefits from economy of scale. Funded by cash reserves it feels like a low risk deal between a willing buyer and seller.
"Viacom will gain a strong advertising income stream, currently bolstered by Big Brother, so retaining Big Brother or replacing it with new compelling content will be important. There is some talk that they could convert one of the channels to pay TV, but certainly they will attempt to pull viewers to some of their paid-for content.
"This is a core business activity for Viacom, shared content across platforms plus new investment in content with greater distribution will be an option for them. Desmond wanted to sell so new investment was at best limited, Viacom have every reason to grow viewer numbers and by doing so grow ad revenue and crossover sales."
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