ITV 'in running for Virgin's UKTV stake'

ITV has reportedly joined the race to acquire Virgin Media's 50% stake in UKTV, the owner of digital channels such as Dave, Watch and Good Food.

Virgin Media expects to raise around £350 million from selling its stake in the pay-TV broadcaster, which was established in 1997 as a joint venture with BBC Worldwide.

Last week, it emerged that US firms Discovery Communications and Scripps Networks International want to acquire the 50% shareholding in UKTV.

ITV has now emerged as a serious bidder for the stake, as the company seeks to move further into pay-TV services to reduce its reliance on advertising revenue.

ITV chairman Archie Norman and chief executive Adam Crozier are understood to have looked at UKTV's books, but it is unclear whether they will forge ahead with a deal, reports The Guardian.

"It is a bit dubious what ITV will get out of it as a dormant shareholder and they are not the ideal partner for the BBC," said an industry source.

There is also rumoured interest in the stake from Channel 4 and Sky, but one party not in the running is Time Warner, after its chief executive Jeff Bewkes indicated last month that the company was "not actively pursuing" a deal.

Virgin Media hopes to complete the sale by the end of the year and it will use the funds to further reduce its corporate debt.

BBC Worldwide, the corporation's commercial arm, has first refusal on the 50% UKTV shareholding and is keen to increase its stake as part of the sale.

Worldwide's cash reserves are likely to be significantly increased after the planned sale of its magazines division.

However, the sale is unlikely to go ahead quickly enough for the organisation to complete a takeover of UKTV, meaning it will more likely seek to dictate the terms of its new partner.

Any party taking Virgin Media's stake would strictly be the junior partner to Worldwide, but the primary appeal of the deal is UKTV's long-term contract with the BBC, which helps sustain the company's £200m annual revenues.

Virgin Media may even decide against a sale of what is still viewed as a valuable asset in the broadcasting industry.

A source said: "It is not the best time to unload one of the last big strategic assets in the pay-TV market. I could potentially see them considering holding on to a chunk [of UKTV] a while longer."