BSkyB faces £500m loss as appeal court rules it must sell most of ITV stake

BSKYB, the pay TV company, faces a loss of more than £500 million on its shares in rival ITV after the Court of Appeal ordered it to sell most of its stake.

In the latest in a series of legal disputes over the stake, the Court of Appeal ordered that a previous decision to force BSkyB to sell most of its shares should stand.

"Sky's appeal on competition issues is dismissed, so the direction that it must reduce its share holding to less than 7.5 per cent will stand."

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The decision also ordered BSkyB to pay the legal costs of both the Competition Commission and the secretary of state.

Yesterday the Court of Appeal refused BSkyB permission to appeal further to Britain's Supreme Court, although it said it was open to the company to apply directly to the court for permission to appeal.

In a statement BSkyB said it noted the result and would review the judgment and consider its next steps.

The owner of Sky Sports built up a stake of 17.9 per cent of ITV in 2006.

At the time ITV was facing a takeover attempt from NTL – now Virgin Media.

BSkyB paid around 135p a share for the stake which effectively blocked a takeover, leading to a bitter war of words between BSkyB founder Rupert Murdoch and Virgin founder Sir Richard Branson.

Britain's dominant pay TV group paid around 940m for 696 million ITV shares, with the stake now valued at just over 400m based on last night's closing price.

While it has the option to retain some of the shares, yesterday's decision led to speculation that another rival may attempt to buy ITV, meaning Sky could face a loss on all of the shares.

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BSkyB has already booked some losses on the investment in its accounts.

ITV shares have plunged as low at 20p meaning the book value of BSkyB's stake is now lower than the market value.

Shares in ITV rose slightly last night on hopes that potential suitors – including RTL, the owner of Channel Five, or possibly a private equity group – may attempt a takeover.

In December 2007 the Competition Commission found that BSkyB's stake "may be expected to operate against the public interest", ordering it to cut its stake.

Both the former business secretary John Denham and the Competition Appeal Tribunal have subsequently upheld that decision.

The dispute led Branson to accuse the Murdoch media empire of being "a threat to democracy".

ITV has also previously called for BSkyB to sell, although BSkyB has insisted the stake was an investment.

BSkyB had wanted the case sent back to the Competition Commission for a fresh investigation, which, if successful, would have delayed the date by which it would have to sell the stake in ITV.

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While the date by which it must sell the shares has been kept confidential it is thought it is likely to be within the next six months.

Shares in ITV closed up 0.3p at 58.15p while BSkyB dropped 4p to 560p.