Hutton: Sky must cut stake in ITV

Business secretary John Hutton has said that Sky must reduce its stake in ITV to below 7.5%.

Hutton's instructions also mandated that Sky not "dispose of the shares to an associated person, not to seek or accept representation on the Board of ITV and not to reacquire shares in ITV".

His decision follows advice issued by the Competition Commission in December, which recommended a reduction in Sky's stake in ITV due to "a significant lessening of competition arising from a loss of rivalry in the all-TV market" between the two broadcasters.

The time in which Sky's disposal of the shares must take place was not disclosed at Sky's request.

The government explained: "The Secretary of State received a request from Sky not to disclose to any party other than Sky the period of time within which the necessary divestment of shares is to be completed. They argued that wider disclosure of this information was not necessary and could be unduly prejudicial to their legitimate commercial interests. ITV argued conversely that the period should be made public. The Secretary of State recognises there are arguments on both sides. On balance, having consulted the Competition Commission and the Office of Fair Trading about their practice in similar cases, the Secretary of State has decided not to disclose the information. The specified divestment period will begin from the date that suitable divestment undertakings are finalised."

Sky acquired its stake in ITV last November for 135p per share, equating to £940m in total. This morning, ITV shares opened at 73p and Sky would be looking at a loss on the order of £250m if forced to sell at the current time.

This morning, Sky said in a statement that it will "give careful consideration to the announcement and confirm any further steps in due course".

ITV said that it "warmly welcomes" Hutton's decision and added: "We believe this decision is in the best interests of the overwhelming majority of our shareholders."