Setanta looks for cash injection

London-headquartered private equity firm Doughty Hanson is reported to be considering injecting a further £100m into Setanta, the ailing Irish pay-TV group.

Doughty Hanson acquired a 21.8% stake in the sports pay-TV broadcaster in 2007 through Irish broadcaster TV3, a 2006 investment. TV3 is understood to have paid in the region of €100m for its stake in Setanta, which broadcasts English Premiership football as well as US PGA golf, rugby and boxing.

However, Setanta lost out to BSkyB in March when the Rupert Murdoch-owned satellite broadcaster won five of the six Premiership football packages in an auction. As a result, Doughty Hanson and Goldman Sachs are said to have written their stakes down to zero. Balderton Capital, previously known as Benchmark Capital Europe, is also an investor in Setanta.

In August 2006, Doughty Hanson beat competition from US investor Veronis Suhler Stevenson, broadcasters Ulster Television and, ironically, Setanta, to acquire free-to-air channel TV3. The vendors in the €265m transaction were Canadian television operator CanWest, UK terrestrial broadcaster ITV and a consortium of private investors.

Doughty Hanson provided an equity investment of €140m in the TV3 transaction, with debt financing from Anglo Irish Bank. Doughty Hanson invested equity from its fourth fund, which closed on €1.6bn in January 2005. A fifth fund raised €3bn in May 2007.

Doughty Hanson and Balderton Capital both declined to comment on the speculation.

A spokesperson for Setanta confirmed that the group was currently in the process of reviewing the business in light of the results of the Premiership auction. He added that Setanta was in talks with its existing investors, but would not comment on speculation that those talks revolve around additional investment, nor would he rule out a capital injection from new investors.

Justin Diddams, a media analyst at RBS, questioned why investors would put more money into Setanta, saying: “Setanta is either working as it is or it isn’t. It was developed to challenge a perfectly functioning market, one that has a monopolistic player in Sky.”

Paul Richards, an analyst at Numis Securities, added that private equity was unlikely to play much of a role in M&A activity in the television sector. “There’s not much money swilling around, and even if there was, I’m not sure they would have the risk appetite in this environment,” he said.