Sky pulls back in bid to buy Tiscali

by Dan Leahul, Brand Republic 22-Dec-08, 09:30

LONDON - BSkyB has stepped back to re-examine its £450m bid for the UK business of broadband provider Tiscali after talks stalled over the underlying value of the Italian firm.

In November, Sky entered exclusive acquisition talks with Tiscali after previous leading bidder Carphone Warehouse walked away from the deal.

Tiscali has been up for auction since it launched a strategic review in February, but its price has been a regular deterrent to any type of formalised agreement.

An initial valuation of £1.3bn was quickly whittled away by loses in market share and deepening economic gloom.

Carphone Warehouse left talks after disputes were raised over its £600m bid in August, which dropped to £450m in September.

Sky is now questioning the £450m price tag for Tiscali's 1.8m UK broadband customers.

The deal would double Sky's customer base and propel it into third place in the UK's broadband market, behind BT and Virgin Media.

The deal has been seen as being out of step with Sky current business plan, which provides broadband service only to its existing television customers.

Analysts said a takeover could raise potential footfalls in regards to integrating the two businesses.

Sky is the last in a long line of companies who considered buying Tiscali's UK business. Vodafone walked away in June after a similar price dispute, but the company has also seen interest expressed by BT, Swisscom and Italian mobile network wind.

In late November, Sky announced plans to raise £600m (£399m) by issuing a ten-year bond to its investors, which could be used for possible acquisitions.