Murdoch stuns television industry with acquisition of £1bn ITV stake

BSkyB announced last night that it had spent close to £1bn acquiring a large stake in ITV, in what was widely seen as an attempt to scupper the potential merger of Britain's largest commercial broadcaster with the cable television company NTL.

The dramatic move by BSkyB, in which it had paid £940m to acquire a 17.9 per cent share of ITV without the knowledge of the ITV board, took the television industry by surprise.

The news came less than a week after revelations that Sir Richard Branson was behind an ambitious £9bn plan to merge NTL (recently renamed as Virgin Media Group) with ITV to create a powerful competitor to the BBC and BskyB.

BSkyB's chief executive James Murdoch, the son of the media mogul and BSkyB chairman Rupert Murdoch, played down suggestions that his company's acquisition of 696 million ITV shares was intended as a "spoiler" for the merger plans. BSkyB said it had no intention of increasing its stakeholding beyond 19.9 per cent, was not planning a takeover of ITV and would not be seeking a seat on the board.

James Murdoch said: "We think that ITV is a premier broadcasting and production brand in Europe [and] that under the right stewardship and leadership there are a variety of opportunities to create value. We look forward to hearing from new management, when it is in place and has their feet under the table, how they intend to take that forward."

Under pressure from sceptical media analysts, who suggested BSkyB was attempting to undermine the merger, he admitted that his company had taken advantage of the turmoil currently surrounding ITV.

The latest development plunges an already traumatised commercial broadcasting sector into even further turmoil. ITV, which celebrated its 50th anniversary last year, has been hard hit by a collapse in television advertising, in the face of the growth of digital channels and competition from the internet.

Long-running calls for the departure of chief executive, Charles Allen, finally culminated in his resignation in August of this year but so far attempts to find a suitable replacement have failed, with several high-profile television industry figures publicly distancing themselves from the job.

Talks of a possible merger with another media giant have reportedly left attempts to appoint a new ITV chairman in "a state of paralysis". The ITV chairman Sir Peter Burt is also expected to part company with the broadcaster.

The interest of NTL-Virgin Media Group, in which Sir Richard is the biggest investor, has been received with coolness by the City, partly because the cable broadcaster has debts of £6bn and is not well placed to invest in ITV.

Since news of NTL's interest emerged, another company RTL, which owns channel Five and is part of the giant German-based media group Bertelsmann, has also been revealed to be "very serious" about making a £5bn offer for ITV. A combined ITV and Five would enjoy more than a 55 per cent share of television advertising revenue.

The initial reactions to BSkyB's seizure of the shareholding were that it had made a shrewd move. Richard Hunter, head of equities at Hargreaves Lansdown stockbrokers, said: "A stake of 17.9 per cent is not quite enough to scupper a deal, but it will make life a lot more difficult for NTL or RTL. It would give BSkyB an insight into NTL or RTL's strategy as BSkyB would have to be consulted as the company's biggest shareholder."

Greg Dyke, the former director general of the BBC, who himself recently led a consortium in a failed attempted takeover of ITV, said BSkyB had deliberately scuppered the NTL merger. "Murdoch is using his muscle and in many ways it is ITV's worst nightmare. You now cannot buy that company without Murdoch's permission because he has effectively got a blocking minority."