British Sky Broadcasting Group Plc, which is 39 percent owned by Fox, will pay 2.9 billion pounds ($4.9 billion) in cash for Fox’s 57.4 percent stake in Sky Deutschland AG, Isleworth, England-based BSkyB said. BSkyB will buy 100 percen of Sky Italia in return for 2.07 billion pounds in cash and a stake in National Geographic Channel.

The sale will give Murdoch ammunition as the 83-year-old weighs how much he can increase an $85-a-share bid for Time Warner without jeopardizing New York-based Fox’s investment- grade credit rating. BSkyB gains leverage, becoming a European satellite and cable service with 20 million subscribers, as it negotiates for right to sports and entertainment.

Bloomberg News first reported BSkyB’s talks with Fox on May 9 and on July 20 said that Murdoch was considering using proceeds from the asset sales to increase his offer for Time Warner, owner of CNN, HBO and the Warner Bros. studios.

“This deal makes a lot of sense,” said Carlo Alberto Carnevale Maffe, a business professor at Milan’s Bocconi University. “Broadcasters must now compete in scale, scope and technology integration against new business models such as Netflix.”

‘Old Dream’

“The deal is also great for Murdoch since now he can keep on pursuing the Time Warner deal and fulfill his old dream of becoming the single entrepreneur in the global media industry with the largest content breadth and depth,” he said.

In a statement, Fox didn’t say how it plans to use the $7.2 billion in cash after taxes that it expects to receive.

Sky Deutschland added 1.6 percent to 6.77 euros at 12:24 p.m. in Frankfurt. BSkyB will offer 6.75 euros a share for the remaining stake. BSkyB fell 4.6 percent to 882.5 pence in London.

The deal provides Murdoch’s Fox empire with a way to obtain cash and maintain a grip on European pay-TV assets within BSkyB, while pressing ahead with efforts to buy Time Warner.

News Split

Murdoch and his son James, who was BSkyB’s chief executive officer from 2003 to 2007, had for years considered combining the European operations. A full takeover bid by Murdoch for BSkyB was derailed in 2011 over the phone-hacking scandal at News Corp., his publishing empire.

Last year, Fox and News Corp. were split into separate publicly traded companies, with the Murdoch family maintaining large voting shares in both.

Murdoch’s $85-a-share cash-and-stock bid valued New York- based Time Warner at about $75 billion, excluding options that could raise the total equity value to $80 billion. Each dollar a share that Murdoch raises his bid costs by almost $1 billion. The offer included 1.531 Fox non-voting shares and $32.42 in cash for each share of Time Warner.

Time Warner, which announced its rejection of Murdoch’s bid on July 16, fell 0.3 percent to $84.01 Thursday in New York. Fox gained 0.7 percent to $32.92.

Uniting Skys

BSkyB said its 21 percent stake in National Geographic Channel, as part of the payment for Sky Italia, is valued at 382 million pounds.

BSkyB forecasts 200 million pounds in cash synergies by the end of the second year after completion of the transaction. It will fund the purchase through a mixture of debt and shares. It plans to sell 156.1 million new shares, with Fox subscribing proportionally to keep its holding in BSkyB at about 39 percent. Moody’s Investors Service put BSkyB’s ‘Baa1’ rating on review for a possible cut.

“The three Sky businesses complement each other well and will be stronger together,” BSkyB Chief Executive Officer Jeremy Darroch said on a conference call. The transaction will probably be completed by the end of October or early November, he said.

BSkyB, which offers satellite TV, broadband and phone services in the U.K., is under increased pressure as BT Group Plc uses free sports channels to win Internet customers. John Malone’s Liberty Global Plc has also stepped up competition by acquiring Virgin Media last year.

Content Grab

BSkyB, which spends about 2 billion pounds a year on content, this week bought a 70 percent stake in the U.K.’s Love Productions, producer of “Great British Bake-off” and TV documentaries such as “Benefits Street.” BSkyB last week sold a minority stake in ITV Plc, the U.K.’s biggest commercial broadcaster with top-rated shows such as “Downton Abbey,” to Liberty Global Plc for 481 million pounds.

Sky Italia, which serves about 4.8 million paying households, is adding terrestrial channels to complete its offerings via satellite and high-speed broadband networks. Sky Deutschland, with about 3.7 million customers, is the smallest and fastest-growing of the three companies as it broke into a market dominated by free-to-air broadcasters.

For Fox, the deal will leave it with cable and broadcast networks plus movie and TV studios, making the company more attractive to investors who want to bet on video production, rather than distribution.

An eventual takeover of Time Warner would reshape the media industry by giving the TV-and-film companies bargaining power in negotiations with cable operators such as Comcast Corp. and Time Warner Cable Inc., which are in the process of their own merger.