Ann: Half Yearly Report and Accounts, page-16

https://www.stuff.co.nz/business/127871921/price-rise-for-sky-sport-this-year-more-likely-than-not

I somehow missed this article from a week ago.

"Moloney would not go into specifics on those opportunities, including on speculation they might involve a tie-up with media firm NZME."

Interesting. I have been speculating with jimdog offline about whether or not Sky are eyeing up NZME. NZME and Sky share many similar characteristics, and produce strong cashflows. If Sky went down this route it would be to become a bigger media play in NZ and then back the offer up with broadband (and eventually mobile).

Sky has clearly been cold on the telco idea - if they wanted to become a telco they would have done a deal with Vocus NZ ages ago.

They also clearly have an idea or two that they want to pursue because they are holding on to the cash. If they weren't considering someone sizeable then you would think they would have already returned at least some of the cash.

But they haven't. So it got me thinking - "If they really don't like the telco idea, then what else might they look at that is affordable? That they could realistically acquire?"

NZME is a good candidate. Although, interestingly, NZME and Sky actually have similar EV's.

NZME market cap = $308M, net debt = $30M, EV = ~$340M
SKT market cap = $485M, zero debt and $130M+ cash (when property sale finalises in 2 weeks), EV = ~$350M

This is very strange indeed given Sky is clearly the larged business both in terms of audience size, revenue and Earning Power.

But, if both parties were willing, and could agree on fair relative values I think a deal could be done.

NZM shareholders could be paid by issuing Sky shares. We then pay off their debt, and would still have $100M cash (and growing) to invest.

Combined business would have $1.1B+ revenue with Owner Earnings of ~$100M. And that is before merging operations (cost savings) and realising synergies (growth potential).

I can't think of a reason why a deal like this wouldn't get Comcom approval. And it is also worth noting that TVNZ and RNZ are highly likely to merge.