In an unexpected move, RTL Group today announced that it has signed a definitive agreement to acquire German pay-TV broadcaster Sky Deutschland.
The transaction, which has been approved by the Board of Directors of RTL Group, is subject to regulatory approvals.
“The combination of RTL and Sky is transformational for RTL Group. It will bring together two of the most powerful entertainment and sports brands in Europe and create a unique video proposition across free TV, pay TV and streaming. It will boost our streaming business, with a total of around 11.5 million paying subscribers, further diversify our revenue streams and make us even more attractive for creative talent, rights holders and business partners,” said Thomas Rabe, CEO of RTL Group.
“The synergies are estimated to be around €250 million per annum within three years after closing, creating significant shareholder value. Together, RTL and Sky will be in an even stronger position to invest in people, content and technology in Germany and in Europe to compete with the global tech and streaming players,” Rabe added.
Dana Strong, Group CEO at Sky, said: “Sky Deutschland has made significant progress over the past three years, delivering strong operational performance and reaching a record number of customers. The business is on track to achieve EBITDA break-even, reflecting the success of our turnaround plan. Combining the strength of our brand with RTL builds on that momentum and opens up even greater opportunities. This deal provides a strong platform for long-term success, and ensures Sky continues to share in the growth of the combined business.”
According to the agreement, RTL Group will fully acquire Sky’s businesses in Germany, Austria, Switzerland, including customer relationships in Luxembourg, Liechtenstein and South Tyrol on a cash-free and debt-free basis. The purchase price consists of €150 million in cash and a variable consideration linked to RTL Group’s share price performance.
The variable consideration can be triggered by Comcast, Sky’s parent company, at any time within five years after closing, provided that RTL Group’s share price exceeds €41. The variable consideration is capped at €70 per share or €377 million. RTL Group has the right to settle the variable consideration in RTL Group shares or cash or a combination of both. RTL Group is considering buying treasury shares to be in a position to settle the variable consideration fully or partly in shares.
Under a separate trademark license agreement, RTL will have the right to use the Sky brand in the DACH region (Germany, Austria, Switzerland), Luxembourg, Liechtenstein and South Tyrol. RTL will acquire Sky Deutschland’s streaming brand WOW as part of the transaction.
Barny Mills, Sky Deutschland CEO, will continue to lead the Sky Deutschland business until the transaction is completed. Stephan Schmitter will stay in his current role as CEO of RTL Deutschland until closing of the transaction and then lead the combined company. RTL Deutschland will remain headquartered in Cologne and Sky Deutschland in Munich. The two businesses will continue to operate independently until regulatory approvals are obtained, which are expected in 2026.
First rumours about Comcast considering a sale of Sky Deutschland emerged in October 2022. RTL’s competitor ProSiebenSat.1 was reported to be interested, but did not pursue a deal, arguing that “we are focused on linear-free TV and our digital footprint. Sky is in the pay-TV business, which is historically a difficult business in Germany.”
A look at the streaming market shows differences between Germany’s two leading commercial broadcasters: In contrast to ProSiebenSat.1, which is focusing on an advertising-financed business model with its streaming service Joyn, the acquisition of Sky Deutschland makes more sense for RTL Deutschland, as the broadcaster has been pursuing a subscription-based approach for its streaming service RTL+, which could enable synergies with Sky and its streaming services Sky Stream and WOW.
Also, Sky’s recent success in securing major parts of the important Bundesliga rights for the next seasons, is likely to have made it an attractive takeover candidate. Nevertheless, the acquisition by RTL comes as a surprise, marking a shift from its core free-TV business to pay-TV, but it follows a clear strategy: turning viewers into subscribers.
