21st Century Fox's Bid for Sky Isn't a Done Deal Yet
December 13 2016 - 12:10PM
Dow Jones News
LONDON—The Murdoch family's 21st Century Fox Inc. already owns
39.1% of Sky PLC, but its latest effort to buy the rest of the
British pay-television giant won't be easy as it faces potential
hurdles from politicians, regulators and minority shareholders.
Asset-management firms and public pension funds that own Sky
stock are questioning whether Fox's bid was fair to all
stakeholders, given the close Fox-Sky relationship. And some
investors and politicians want to examine whether such a deal would
consolidate too much media power in too few hands.
The two companies said Friday that they had reached an agreement
in principle for Fox to buy the remaining Sky shares it doesn't
already own for £ 10.75 ($13.64) a share in cash, or about $14
billion. The bid represented a 40% premium to its closing price on
Dec. 6, the last business day before Fox made its approach.
Sky closed up 1.6% at £ 9.88 in London trading Tuesday, below
the offer price, underscoring investor uncertainty over the
monthslong and uncertain U.K. regulatory review Fox likely faces if
the offer proceeds.
Fox shareholders, too, are skeptical. The company's shares are
down about 7% from their closing price on Thursday, the day before
the companies announced the potential deal. Analysts said Fox might
fund the Sky bid by halting remaining stock buybacks. Fox declined
to comment.
Still, Fox faces fewer obstacles than it did in 2011, when its
predecessor abandoned a previous takeover bid amid public anger
over revelations that a now-defunct Rupert Murdoch newspaper had
hacked into the phones of politicians and crime victims.
James Murdoch, one of billionaire media mogul Rupert's sons, is
Fox's chief executive and Sky's chairman. The elder Mr. Murdoch and
his family are major stakeholders in Fox as well as News Corp,
publisher of The Wall Street Journal and three of Britain's biggest
newspapers: the Sun, the Times and the Sunday Times.
Sky's board created an independent committee, composed of board
members it considered to be free of conflicts of interest, to lead
its negotiations with Fox, but some minority shareholders are
skeptical.
Royal London Asset Management said creating an independent
committee didn't go far enough to address potential conflicts of
interest. Through a spokeswoman, Jupiter Asset Management fund
manager Alastair Gunn said the committee should push for a higher
price and that Fox's initial offer should be only the start of the
conversation.
"All directors of Sky have a duty not to disadvantage the public
shareholders," said Kieran Quinn, chairman of the Local Authority
Pension Fund Forum, an association of 71 British public pension
funds with about £ 175 billion in combined assets. Some of the
funds hold Sky stakes.
In a statement, Mr. Quinn said he wanted to ensure that "the
premium paid is appropriate and that shareholders are not
disadvantaged by any temporary low in the share price." Sky's stock
most recently traded above the offer price of £ 10.75 in
February.
Fox hasn't made a formal offer yet. Should it do so, a
government minister can refer the merger to Ofcom, Britain's
telecommunications regulator. In debates Tuesday, lawmakers in the
opposition Labour Party urged the government to do so, citing
concerns about competition and plurality, or the concept of having
a diversity of viewpoints across the media. The Conservative
government declined to comment ahead of a formal offer.
Fox is expected to make the case that since its predecessor
hived off its publishing assets in 2013, Fox has no news ownership
in the U.K. except through its existing minority position in Sky,
and therefore a combination won't affect diversity in media
ownership.
Any deal also faces scrutiny from European Union antitrust
regulators.
Fox has two ways to structure its proposed takeover: through a
tender offer or through a so-called scheme of arrangement. A tender
offer could allow Fox to obtain majority control of Sky more
quickly but could delay its path to 100% ownership, meaning Fox
might have to deal with minority shareholders for some time. By
comparison, a scheme of arrangement allows the acquiring company to
more quickly acquire 100% of the target firm but can be harder to
pull off, in part because Fox's stake would be excluded from such a
vote.
Ben Dummett and Nicholas Winning in London and Shalini
Ramachandran in New York contributed to this article.
Write to Stu Woo at Stu.Woo@wsj.com
(END) Dow Jones Newswires
December 13, 2016 12:55 ET (17:55 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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