Sky buying ITV‘s M&E business

Research evidence excerpt

Sky buying ITV‘s M&E business

ds for future M&A to

grow the Studios business, CFO Chris Kennedy replied: "Studios has the scale right now to

compete. It's one of the largest independent producers in the world. We don't need scale for

scale's sake. We've had a really successful history of bolt-on acquisitions, which fulfill a

purpose. They're financially sensible, but also that they build out the portfolio of labels that

we have. And obviously, we're getting Love Productions as part of this deal. So that's

effectively a £200m acquisition. We feel that the right thing to do is to set the Studios'

business up for success with an investment-grade balance sheet, 1.5x leverage, which is

comfortably investment-grade, which allows Studios to continue to do bolt-on acquisitions,

but we don't need to retain the cash."

• Content supply agreement ex Sport: £2.1bn from 2028-32 is £420m pa, which is lower than

the internal revenue that ITV has been reporting over the past years at around £600m. When

we asked management if they expect a lower contribution going forward, CFO Chris Kennedy

clarified: "the £600m includes intra Studios revenue, which was £89m last year. And it also

includes sport production, which is transferring from Studios to M&E at completion because

Sky are a brilliant broadcaster of sports and we've got a brilliant sports team, so it made

sense as part of that. So, the £420m average over the five years is in line with the internal

supply historically."

• ITV Studios growth in a flat market? When asked why ITV Studios should grow in a flat

market, Managing Director of ITV Studios Julian Bellamy responded: "our revenue growth is

going to be driven by leveraging those competitive advantages. That's your formidable talent