ITV Calls Sky Deal Transformative as It Plans £950 Million Shareholder Return

Key Points

• ITV plans to sell its Media & Entertainment unit to Sky in a deal it calls “transformative,” and expects to return about £950 million to shareholders after completion.
• The transaction values ITV Media & Entertainment at up to £1.6 billion and includes upfront cash, Love Productions, and a potential advertising-based earn-out, with ITV also expecting to reduce debt and keep ITV Studios on a stronger standalone footing.
• ITV signed a long-term £2.1 billion content supply agreement with Sky, while Sky will take over the Channel 3 license and is expected to maintain ITV’s public service broadcasting obligations through 2034.

ITV LON: ITV said its planned sale of its Media & Entertainment business to Sky represents a “transformative moment” for the group, unlocking value for shareholders while leaving ITV Studios as a standalone global content production business.

On an investor call following the announcement, Chief Executive Carolyn McCall said the transaction would enable a cash return of about GBP 950 million to shareholders, protect the future of ITV’s public service broadcasting commitments and create a “distinctive, pure-play, global content business” in ITV Studios.

“At a time of unprecedented change in viewer behavior,” McCall said, the combination of ITV Media & Entertainment, including ITVX and its free-to-air channels, with Sky’s technology-led platform would help the combined business compete more effectively with large U.S. streaming platforms and support greater investment in British content.

Deal Values ITV Media & Entertainment at Up to GBP 1.6 Billion

Chris Kennedy, ITV’s Group COO and CFO, said the transaction values ITV Media & Entertainment at between GBP 1.4 billion and GBP 1.6 billion. The consideration includes GBP 1.2 billion in initial cash payable on completion, subject to customary closing adjustments, with no tax due on that element.

The deal also includes the contribution of Love Productions, the producer of The Great British Bake Off, valued at GBP 200 million, and up to GBP 200 million of additional cash contingent on 2027 total advertising revenue. Kennedy said the earn-out becomes payable if total advertising revenue exceeds GBP 1.7 billion, with the maximum payout reached at GBP 1.8 billion. The earn-out would be subject to U.K. corporation tax.

Kennedy said ITV expects initial net cash proceeds of about GBP 1.05 billion after transaction and separation costs. He said the company plans to use proceeds to reduce debt, target net debt-to-EBITDA of about 1.5 times for ITV Studios after completion and return about GBP 950 million in cash to shareholders.

He noted that the separation of two businesses that have been integrated for decades will be complex and is expected to result in gross transaction and separation costs of about GBP 185 million, or GBP 155 million net of tax, over the next three to four years.

Long-Term Content Agreement With Sky

A central feature of the transaction is a long-term content supply agreement between ITV Studios and Sky. McCall said the GBP 2.1 billion agreement is a minimum spend guarantee that replicates benefits the Media & Entertainment and Studios divisions have had under ITV’s integrated structure.

Julian Bellamy, Managing Director of ITV Studios, said the agreement runs from 2028 through the end of 2032 and guarantees that ITV Media & Entertainment’s current level of non-sport spend with ITV Studios is maintained. The agreement spans genres including drama, entertainment, soaps and daytime programming and covers programs commissioned for either ITV Media & Entertainment or Sky.

Sky will also acquire the Channel 3 license as part of the transaction. McCall said Sky will comply with ITV’s public service broadcast commitments through the end of the license period in 2034, including regional and national news.

ITV Studios to Stand Alone as Global Content Business

ITV executives used the call to outline the investment case for ITV Studios as a separate company. Bellamy described the division as a “rare creative powerhouse” with more than 60 production labels across 13 markets, a global distribution operation and a library of more than 100,000 hours of content.

Bellamy said ITV Studios generated more than GBP 2 billion of revenue, about GBP 330 million of EBITDA and EBITDA margins of 16%. He highlighted programs and brands including Love Island, The Voice, The Chase, Line of Duty, Fool Me Once, Mr Bates vs The Post Office, Coronation Street and Emmerdale.

Love Productions will strengthen the studio business, Bellamy said, citing its production of The Great British Bake Off, The Piano and The Great British Sewing Bee. He said Love Productions had GBP 75 million of revenue and GBP 24 million of EBITDA, referring to 2024 figures, and Kennedy later said 2025 numbers were not yet publicly available but were “pretty much in line” with 2024.

David McGraynor, COO of ITV Studios, said more than 75% of Studios revenue comes from returning shows and recurring monetization activity. He said the business has historically converted around 80% of operating profit into cash and is supported by an asset-light, made-to-order production model.

Growth Strategy and Market Position

McGraynor said ITV Studios operates in a global content market worth more than $235 billion last year. While overall growth is moderating, he said the company is positioned in areas of demand including streamers, ad-supported platforms and library content.

He said revenue from streamers has almost tripled over the past four years. Bellamy said ITV Studios’ growth will come from leveraging its talent base, scale and IP library, while leaning into growth segments including streamers, scripted content and digital monetization through Zoo55.

McCall said Zoo55 revenue is currently around GBP 60 million. Bellamy said ITV content generated more than 47 billion views across social platforms last year.

In response to analyst questions, Kennedy said the future ITV Studios capital allocation framework would be broadly consistent with the current approach: investing for organic growth, maintaining an investment-grade balance sheet, paying a sustainable dividend and pursuing value-accretive bolt-on acquisitions where there is strategic fit.

Regulatory Timeline

McCall said the transaction remains subject to customary regulatory approvals and that ITV is working with Ofcom, the Department for Culture, Media and Sport and the Competition and Markets Authority. She said formal regulatory filings are planned “in short order,” with ITV targeting the fourth quarter of 2026 for the start of the formal review period.

The company expects to hold a Capital Markets Day for ITV Studios closer to completion, indicatively in the first half of 2027, and expects the transaction to complete in the second half of 2027. McCall said the shareholder capital return will follow completion, with further details to be provided closer to that date.

About ITV LON: ITV

ITV is a producer, streamer and broadcaster, consisting of ITV Studios and Media & Entertainment (M&E). ITV Studios is a scaled global creator, owner and distributor of high-quality TV content, producing some of the most successful shows in the world. It operates in 13 countries, across 60+ labels and is diversified by genre, geography and customer in the key creative markets around the world. Media & Entertainment is the largest commercial streamer and broadcaster. Through M&E, we make brilliant British-focused content available on ITVX - our free, advertiser-funded streaming service - alongside our free-to-air linear TV channels.

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