Discovery, Scripps circle UKTV stake

Two leading US media companies are reportedly in the running to buy Virgin Media's stake in UKTV, the broadcaster behind digital channels Watch, Dave and Yesterday.

According to The Sunday Times, Discovery Communications and Scripps Networks International want to acquire Virgin Media's 50% shareholding in UKTV, after the cable operator recently accelerated its plans to offload the asset.

Established in 1997 as a joint venture between Virgin Media and BBC Worldwide, the BBC's commercial arm, UKTV operates 10 linear channels, including Dave, Watch, Good Food and Yesterday, attracting around 36 million viewers every month.

Speculation about Virgin Media's intention to sell its UKTV stake dates back several years, as the firm focuses on disposing of its non-core assets to concentrate on its cable business.

Last month, fresh rumours surfaced about an imminent sale after the company hired investment banks UBS and Goldman Sachs to find a buyer for the stake.

Virgin Media expects to raise around £350 million from the sale and it will use the funds to further reduce its corporate debt.

Worldwide, which has first refusal on the remaining UKTV shareholding it does not already own, is widely viewed as the most logical party to complete a deal.

However, The Sunday Times claimed that Worldwide does not have enough borrowing headroom to buy out Virgin Media, leaving the door open to Scripps and Discovery.

Channel 4 and Sky are also thought to be in the running for the stake, which could be sold before the end of the year.