Sky Network share price tumbles 6% on acquisition news

The potential acquisition would expand Sky's presence in radio and outdoor advertising.

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Key points

  • The Sky Network share price is falling on potential MediaWorks acquisition
  • The company remains highly uncertain whether the deal will proceed
  • The Sky Board believes the acquisition would deliver improved returns for shareholders

The Sky Network Television Limited (ASX: SKT) share price is tumbling in morning trade, down 6.3%.

Sky Network shares closed yesterday trading for $2.38 apiece and are currently at $2.23.

The early morning selling comes after the dual-listed, New Zealand-based satellite TV provider confirmed media speculations over a potential acquisition.

What acquisition is in the pipeline?

The Sky Network share price has come under pressure after the company confirmed recent speculation that it is in exclusive negotiations to acquire MediaWorks Holdings Limited's radio and out-of-home advertising business.

Rumours began to circulate when Sky Network last month said it would hold off releasing any additional capital allocation and strategy updates until reporting its full-year financial results in August with an eye on "investment opportunities".

MediaWorks radio networks include Today FM, Mai-FM, The Rock, and The Edge. The company is privately owned by Oaktree Capital Management and Quadrant Private Capital.

Sky Network stated: "The likelihood of a transaction proceeding is still highly uncertain with discussions and due diligence ongoing and incomplete."

The company said that should the acquisition of Mediaworks proceed, it would not need to raise additional equity. However, the deal would need to be approved by an ordinary resolution by shareholders at an extraordinary shareholder meeting.

When it reported its half-year results on 24 February, Sky said it was "assessing opportunities to invest capital to accelerate the growth of the business, generate new revenue streams, and deliver improved returns for shareholders".

Today the company's board said it believes acquiring MediaWorks is in line with that strategy.

Sky Network share price snapshot

Following some difficult years, the Sky Network share price has rebounded over the past 12 months, up 44% despite this morning's retrace. That compares to a 1% full-year loss posted by the All Ordinaries Index (ASX: XAO).

The company has a market cap of $403 million.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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