Discovery NZ Acquisition Narrows Losses to $9M EBITDA, Sky Targets Synergies
Sky New Zealand has finalized its acquisition of Discovery NZ Limited for a nominal sum, aiming to leverage significant cost synergies and diversify revenue streams. Despite Discovery NZ’s recent losses, Sky projects a positive cash flow impact and a pathway to meaningful earnings growth by FY28.
- Acquisition of Discovery NZ completed for $1 on a cash-free, debt-free basis
- Discovery NZ reported a $77.6 million after-tax loss in 2024, mainly due to restructuring
- Sky’s due diligence adjusts 2024 EBITDA loss to a proforma $9 million for continuing operations
- Expected $10 million incremental EBITDA by FY28 from synergies in programming and infrastructure
- Acquisition structured to deliver positive free cash flow from year one without impacting FY26 dividend
Strategic Acquisition Completed
Sky New Zealand has officially completed its acquisition of Discovery NZ Limited, a move that positions the broadcaster to accelerate growth and diversify its revenue base, particularly in advertising and digital sectors. The deal was struck for a nominal $1 on a cash-free, debt-free basis, reflecting Discovery NZ’s recent financial challenges.
Discovery NZ reported a significant after-tax loss of $77.6 million for the year ended December 2024, a figure largely influenced by a major restructuring that included the closure of its Newshub operation. Sky’s management emphasized that these losses were impacted by one-off and non-cash items, and that the underlying continuing operations present a more optimistic picture.
Financial Reconciliation and Outlook
Following detailed due diligence, Sky has reconciled Discovery NZ’s reported EBITDA loss to a proforma $9 million loss for continuing operations. This adjustment accounts for normalized employee costs, property lease exits, and revised content agreements. Importantly, the acquisition includes content rights free of payables, which reduces net working capital requirements and provides a cash flow benefit in the first 12 to 18 months post-acquisition.
Sky projects that through targeted synergies, primarily in programming, broadcast infrastructure, and overhead cost reductions, it can deliver at least $10 million of incremental EBITDA by fiscal year 2028. These synergies are expected to materialize mostly in years two and three following integration.
Cash Flow and Dividend Stability
Sky’s CEO, Sophie Moloney, highlighted that the transaction structure enables a pathway to positive underlying free cash flow from the first year. Despite some anticipated short-term accounting noise in FY26, the acquisition is not expected to impact Sky’s 30 cents per share dividend target for that year. The company also benefits from a debt-free balance sheet and reduced capital expenditure requirements, particularly related to the ThreeNow platform.
Overall, the acquisition is framed as a value-accretive strategic fit that enhances Sky’s content offering and operational scale in the New Zealand media landscape.
Bottom Line?
Sky’s acquisition of Discovery NZ sets the stage for a leaner, more diversified media player; but execution of synergies will be key to unlocking promised gains.
Questions in the middle?
- How quickly will Sky realize the projected $10 million EBITDA synergies by FY28?
- What impact will the closure of Newshub have on Sky’s content strategy and audience reach?
- How might competitors respond to Sky’s expanded scale and diversified revenue streams?