ITV agrees to sell broadcasting arm to Sky for up to £1.6bn

Dan Coatsworth, head of markets at AJ Bell, said: “The shackles are off for ITV.

“It is set to be free of its broadcasting, advertising and streaming operations and have a tight focus on production. This separation has been talked about for years, but no-one thought it was possible.

“Sky is stepping in as the knight in shining armour, spying an opportunity to reach a bigger audience and strike more favourable deals with advertisers.

“This looks like a win-win situation for both ITV and Sky and is the biggest shake-up of the UK’s media landscape in decades.

“There are many moving parts, hence why it has taken so long to reach an agreement on the terms and conditions. ITV Studios was always the jewel in the crown in the media group, and now it’s the star of the show.

“ITV’s shareholders should benefit from the separation in several ways. The company will return £950 million to investors, although it hasn’t said how this will be done. Expect a mixture of share buybacks and dividends.

“ITV’s shares might trade on a higher multiple of earnings as historically the linear TV operations acted as a drag on its valuation.

“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.

“Fans of ITV shows won’t have to worry about the top shows disappearing from their screen, at least for now. It’s expected to be business as usual for the near-term.

“It’s inevitable that Sky will do a thorough review of programming and it’s plausible that viewers will see more repeats of shows like quizzes that have evergreen qualities.”