ITV has confirmed it is in “preliminary discussions” with Sky to potentially sell its broadcasting business for £1.6bn.

The talks are over ITV’s media and entertainment (M&E) division, the broadcaster confirmed, which includes its free-to-air TV channels and the streaming service, ITV X.

ITV Studios, which is the company’s production arm that makes TV shows such as I’m A Celebrity... Get Me Out Of Here! and Love Island, would not be subject to the deal.

Sky’s owner, US-based media group Comcost, has not yet commented on the speculation.

“There can be no certainty as to the terms upon which any potential sale may be agreed or whether any transaction will take place,” a statement from ITV said. “A further announcement will be made in due course if appropriate.”

The speculation comes a day after ITV announced its Q3 results, in which it forecast a 9% drop in revenue for the final quarter of its financial year, citing uncertainty over tax rises in the upcoming Budget.

Sky News reported that ITV’s chief executive, Dame Carolyn McCall, has told staff in an email that there is currently “no agreement in place” and “no certainty around whether any acquisition will go ahead”.

“While we don't have any more information we can share today, I want to reassure you we will be as open and transparent as possible,” she also said. “At this stage, it’s very much business as usual.”

Head of markets at AJ Bell, Dan Coatsworth, commented that the fact ITV’s M&E arm had attracted a suitor, rather than ITV Studios, was a “surprise”.

“The potential deal to sell the media arm to Sky looks like an ideal situation, as ITV gets rid of the weaker part of its business, and the one with less attractive growth prospects,” Coatsworth added.

“The £1.6bn mooted price is based on enterprise value which includes debt, but there are no details about how much borrowings would be allotted to the media division.

“ITV as a whole company was valued at £2.5bn before the news broke, and there have been suggestions that the Studios arm could be worth more than that amount alone. If the split happens, ITV shareholders would be left owning a pureplay content production business which might attract a much higher valuation, even after today’s share price jump.”

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