Shares in ITV PLC (LSE:ITV) nudged 1.5% higher after it agreed to sell its media and entertainment division to Sky for up to £1.6 billion, in a deal that breaks up the broadcaster and hands shareholders a cash return of around £950 million.
The sale covers the arm behind ITV's television channels and its ITVX streaming service, alongside shows including Coronation Street, Emmerdale, Love Island and I'm a Celebrity…Get Me Out of Here!.
Sky, the pay-television group owned by the US media company Comcast, will pay £1.2 billion in cash at completion.
It will also contribute its Love Productions business, the maker of the Great British Bake Off, at an agreed value of £200 million.
A further £200 million may follow in the second half of 2028 if ITV's total advertising revenue exceeds £1.7 billion in 2027.
ITV plans to return around £950 million to shareholders, equivalent to 25p per share, once the deal completes.
That payout represents about 90% of the net cash proceeds of roughly £1.05 billion, after transaction and separation costs of about £185 million.
The disposal leaves ITV Studios, the group's content production arm, as a standalone business that will keep its London listing.
ITV Studios will become a pure-play global content business, and the company said the split would unlock its value.
The two sides have agreed a content supply agreement running from 2028 to 2032, with a minimum spend commitment of £2.1 billion.
Carolyn McCall, the ITV chief executive, said the transaction delivered tangible value for shareholders and built on the group's move into streaming.
She said Sky would be a strong and responsible custodian of the business, investing in its future while preserving the qualities valued by viewers and advertisers.
Andrew Cosslett, ITV's chairman, said the deal secured the company's role as a public service broadcaster at a time of rapid change in the industry.
ITV committed last year to renewing its public service broadcasting licences until 2034, covering national and regional news, current affairs and free UK programming.
Sky has pledged to honour those obligations until the licences expire, and is acquiring the Channel 3 licences as part of the deal.
Dana Strong, Sky's group chief executive, described the transaction as a defining moment for British media that would combine free-to-air television, pay TV and streaming.
The two companies said the combined business would have the scale to compete more effectively with global streaming platforms.
ITV valued the media and entertainment arm at an enterprise value of £1.4 billion to £1.6 billion, implying a multiple of about 5.6 to 6.4 times its 2025 earnings before interest, tax, depreciation and amortisation.
The transaction requires regulatory approval and is expected to complete in the second half of 2027.
Analysts at AJ Bell said of the deal: “A slimmed-down ITV would be an attractive takeover target for someone like Netflix looking to acquire production facilities and a rich library of content.
"Equally, ITV could be an acquirer itself, making bolt-on deals."
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