Broker snap: 800p+ BSkyB offer looks likely

16th Jun 2010 12:45

There is a high probability of News Corp coming back to British Sky Broadcasting (BSkyB) with an offer on or north of 800p per share, but the shares are likely to trade below this level, reflecting regulatory risk, Panmure Gordon reckons.Even so, the broker thinks the bid approach (announced on Tuesday) is "massively bullish" for the sector and could perk up interest in terrestrial TV operator ITV and advertising firm Aegis Group.Panmure has bumped up its BSkyB target price to 750p in the wake of the pay TV firm's rejection of a 700p share offer from 39.1% shareholder News Corporation. It has upgraded the shares from "sell" to "hold".Analyst Alex DeGroote feels confident News Corp will return with a higher offer."From the viewpoint of News Corp, the strategic merit of consolidating BSY is threefold: 1/ It increases the proportion of wholly-owned assets, which derive subscription revenues; 2/ It reduces group-wide exposure to cyclical revenues; 3/ It anticipates a pick-up in BSkyB profit performance after years of heavy investment," DeGroote said.The main decision BSkyB shareholders have to make is whether to sell in the market now or hang on in the hope that a better offer materialises and, furthermore, that any such bid is cleared by the authorities."At issue is cross-media ownership given that News Corp is the parent company of the Sun and The Times. Common-sense tells us that a deal is likely to get through, however the duration of a review is hard to call. This is why the shares will trade at a meaningful discount to the offer price," DeGroote suggests.