Fox finalizes $14.8-billion bid for Sky broadcasting. Now regulators can chew on it
Rupert Murdoch’s 21st Century Fox finalized its $14.8-billion cash bid for full control of the pay-TV giant Sky on Thursday, triggering what could be a rigorous regulatory review in Europe.
If approved, Fox would take over a business that it launched 25 years ago and would further the company’s ambitions to be a global powerhouse.
“Given our long history with the company and how much Sky has grown its production and distribution businesses … fully combining the business is a clear, logical next step in our portfolio evolution,” Fox Executive Chairman Lachlan Murdoch said Thursday in a call with analysts.
Some in Britain, however, are wary of the consolidation. In recent days, critics have called on regulators to take a hard look at the proposed deal, which would enable the Murdoch family to solidify control of one of Europe’s leading TV broadcasters.
Fox late last week reached a preliminary accord to buy the nearly 61% of Sky that it does not own. On Thursday, Fox said it had finalized a pact with independent Sky directors to pay 10.75 British pounds for each outstanding share of Sky that it doesn’t own. Fox said it expects the deal to be complete by the end of 2017.
Now, Britain’s secretary of state for culture and media, Karen Bradley, must determine whether to recommend an in-depth review into whether the proposed consolidation of Sky would give the Murdoch family too much control over media in Britain.
The Murdochs, through publishing firm News Corp., own several influential newspapers in Britain, including the Times of London, the Sunday Times and tabloid Sun. Although News Corp. and Fox are separate entities, the Murdoch family controls both with 39% of the voting shares.
Fox’s bid for Sky comes five years after the company abandoned an earlier attempt to acquire the satellite TV provider, which now has 22 million subscribers in Britain, Ireland, Germany, Italy and Austria.
Sky boasts exclusive rights to soccer and other sporting events, making it a must-have subscription for many consumers. It also sells broadband Internet service, an online streaming plan and a Sky-branded phone service.
“Sky is the No. 1 pay-TV brand in all its key markets,” Fox Chief Executive James Murdoch said. “The combined company will also be a global sports and entertainment leader.”
The earlier deal for Sky collapsed under the weight of the 2011 cellphone hacking scandal that unleashed a public outcry in Britain that enveloped the media company and bruised its reputation.
Fox, then part of News Corp., walked away from the earlier transaction, valued at $12 billion, after revelations that reporters and operatives for the company’s London tabloids had hacked into voice mail messages left on cellphones for members of the royal family, celebrities including Hugh Grant, and even crime victims.
The scandal was costly for the media company, and it was a setback for James Murdoch, who had been in charge of Fox’s British businesses when the ethical lapses occurred. Now, he runs all of Fox and also serves as chairman of Sky.
This week, former British Prime Minister Gordon Brown suggested that British officials complete the second phase of an inquiry into the phone hacking scandal before giving a green light to Fox’s plan to consolidate Sky.
The move reveals lingering strong sentiment surrounding Fox Executive Chairman Rupert Murdoch, 85, who long has been influential in British politics.
In addition, some Sky shareholders have said Fox’s bid was too low and does not represent Sky’s true value. They wanted Fox to raise the price. Fox countered that its offer represents a 40% premium over Sky’s closing price last week, before Fox announced its preliminary bid.
Fox pounced at a good time for the American media company because Sky’s shares were down, and because the U.S. dollar has been particularly strong since Britain’s “Brexit” vote to leave the European Union.
Fox currently holds a 39.1% interest in Sky. The bid values Sky at $23 billion. Since the deal was first announced, Fox’s stock experienced volatility. Research firm MoffettNathanson downgraded Fox, and other firms were perplexed.
“We scratch our heads in terms of what a distribution company headquartered in the U.K. does for a global content [company] headquartered in the U.S. over the long term,” Wells Fargo Securities analyst Marci Ryvicker wrote in a report this week.
The deal also needs approval from the European Union.
“We do think that this passes regulatory muster, and … that no meaningful concessions will need to be made,” Lachlan Murdoch said.
Beyond consolidating Sky’s revenue of about $15 billion a year, Fox is hoping to glean consumer insights from Sky’s customers to help Fox expand its businesses, potentially including streaming services offered directly to consumers.
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UPDATES:
11:21 a.m.: This article was updated to include comments from Fox executives.
This article was original published at 6:50 a.m.
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