Court tells Sky to reduce ITV stake

A court of appeal has ruled that Sky must reduce its 17.9% stake in ITV, with the satellite firm now expected to finally accept the decision.

At a hearing today, three judges - Lord Justice Lloyd, Lord Justice Rix and Mr Justice McKay - threw out Sky's latest appeal against a Competition Commission ruling that its stake must be reduced to 7.5%.

"Sky's appeal on competition issues is dismissed, so the direction that it must reduce its shareholding to less than 7.5% will stand," they said.

The judges also moved to deny Sky permission to escalate its appeal to the Supreme Court as a further measure.

Last October, Sky launched a fresh appeal against the CC ruling about its 2006 purchase of 696 million shares in ITV for £940m to become the broadcaster's largest shareholder.

At the time, there were suggestions that the purchase was a blocking move to prevent ITV joining up with Sir Richard Branson's Virgin Group, containing cable operator NTL, now Virgin Media.

In 2007, the then ITV executive chairman Michael Grade expressed concern that Sky's stake in the broadcaster was not in the interests of ITV's shareholders.

The Competition Commission subsequently ruled in 2008 that Sky's holding must be reduced to 7.5%, but the firm immediately lodged an appeal against the decision to the Competition Appeal Tribunal (CAT).

In response, Sky has consistently argued that the commission's consultation on the case made "mistakes at key steps leading to the divestment decision", but those suggestions have now been dismissed.

Sky now has a 28-day period in which to appeal directly to the Supreme Court. However, the firm now seems resigned to the decision and has reportedly held talks with interested parties about a sale.

Five-owner RTL, Italy's Mediaset and private equity group Blackstone could all be potential suitors for the stake, but Sky may be forced to take a significant loss on its investment.