By Dawn Chmielewski and Paul Sandle
(Reuters) -Sports streaming service DAZN is nearing a deal to acquire Britain's BT (LON:BT) Sport in an estimated $800 million transaction that will give it access to sought-after rights to the English Premier League and UEFA Champions League matches, four sources familiar with the matter told Reuters.
A deal is expected to be reached as soon as this month, after protracted negotiations that became public last fall, the sources said. The transaction has yet to be finalized and could still fall apart, they added.
Representatives of BT and DAZN declined to comment, as did those for Discovery INC, which emerged as a rival bidder in December when discussions between BT and DAZN stalled.
The U.S. media company, which owns the pan-European sports network Eurosport, offered to form a joint venture with BT, something the telecoms company was considering as an alternative to a sale, another source said. Britain's Sunday Telegraph first reported the joint-venture talks.
Discovery is still in discussions though DAZN is viewed as the leading contender at the moment, according to two of the sources.
A major obstacle has been securing agreements with rights holders as well as with Comcast Corp (NASDAQ:CMCSA)'s Sky and Virgin Media, which distribute BT Sport's programming in Ireland and the UK, two of the sources told Reuters.
Live sporting events attract large audiences, and pay TV providers and streaming services are willing to pay a premium to carry games. In the United States, the National Football League signed rights deals with CBS, NBC, Fox, ESPN and Amazon (NASDAQ:AMZN) collectively worth $100 billion over the next 11 years.
DAZN backer and billionaire investor Len Blavatnik sought to capitalize on the enduring popularity of sports, bankrolling a streaming service that would give fans around the world access to live events. DAZN now has 11 million subscribers, according to one person familiar with the matter.
BT Sport has around 5 million total viewing households according to Enders Analysis.
A sale would give the telecoms company an infusion of cash at a time when it is investing in the costly rollout of its fiber broadband and 5G next generation wireless networks. It would also lift future sports rights payments off its books. Like counterparts in the U.S., BT invested in sports programming to attract and retain subscribers, spending billions of pounds on soccer rights in particular to take on market leader Sky.
But analysts have said BT Sport's value contribution has been hard to define, and some investors have balked at the risk of bidding for expensive rights. This set the stage for a sale, according to one source close to negotiations.
Acquiring BT Sport would expand DAZN's reach in the UK and Ireland, though its global expansion strategy has come at a cost. In 2019, the most recent year for which information is available, DAZN reported an after-tax loss of $2.15 billion, which it attributed to continuing investment in its platform and the introduction of the service in new markets in Spain and Brazil. About $1.7 billion of the spending was to acquire sports rights, according to regulatory filings in the U.K.
As with other sportscasters, DAZN was hurt by the pandemic, which temporarily halted competitions in the spring of 2020. Blavatnik’s Access Industries stepped in to provide more than $1 billion in loans and other investments to fund operations, according to filings. It pledged to ensure DAZN could meet its financial commitments through January, filings reveal.
A deal with BT Sport could set the stage for an initial public stock offering through the London exchange. Bloomberg reported last year that the company was considering an IPO to raise cash, a strategy two insiders confirmed to Reuters.
It would also provide an opportunity for Blavatnik, who saw his $3.3 billion bet on Warner Music Group result in a $7.5 billion boost to his net worth when the label went public in 2020, recoup his investment in the streaming service.