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Rupert Murdoch's Fox agrees deal to buy Sky Rupert Murdoch's Fox makes Sky bid five years after hacking scandal
(about 3 hours later)
British broadcaster Sky has agreed an £18bn takeover by Rupert Murdoch’s US media group 21st Century Fox five years after a takeover was abandoned at the height of the phone-hacking scandal. Rupert Murdoch has swooped in with an £11.2bn offer to take full control of the satellite broadcaster Sky, five years after he was forced to abandon a similar deal amid public revulsion over the phone-hacking scandal.
In a stock market announcement, Sky said the independent directors of both companies had reached agreement on an offer price of £10.75 per share to buy the 61% of the company that Fox does not already own. The media mogul’s 21st Century Fox film and television group said it had reached an agreement in principle to buy Sky, which would bring together the company behind Fox News with the largest pay-TV broadcaster in Britain to create the most powerful media group in the UK.
The independent directors said they would recommend the deal to Sky shareholders, assuming agreement on the other terms is reached.Sky has formed an independent committee of the board to consider the terms of the proposal. Labour and Liberal Democrat politicians said the government had to intervene and demanded an inquiry on the grounds of public interest. Fox owns the controversial rightwing Fox News network in the US, while Sky News is a politically neutral service in competition with the BBC and ITV news.
Sky said: “The independent directors of Sky note today’s share price increase, and announce that Sky has received an approach from 21st Century Fox, Inc. After a period of negotiation, the Independent Directors of Sky and 21st Century Fox have reached agreement on an offer price of £10.75 per share in cash, less the value of any dividends subsequently paid by Sky. Completing the deal, which values all of Sky at £18.5bn, would represent a long-held ambition for Murdoch and his son James, the chief executive of 21st Century Fox. Murdoch already owns 39% of Sky but was forced to abandon an attempt to take full control in 2011 after it emerged that journalists at the News of the World had hacked the phone of the murdered teenager Milly Dowler.
“However, certain material offer terms remain under discussion and there can be no certainty that an offer will be made by 21st Century Fox, nor as to the terms of any such offer.” If the negotiations between the two companies lead to a definitive takeover offer being accepted, competition authorities must be notified and the secretary of state for culture, media and sport, Karen Bradley, will have to decide whether to ask the media regulator, Ofcom, to carry out a public interest test.
The offer represents a premium of 40% to Sky’s closing price on 6 December, the last business day before the initial proposal had been received from the US company, and a premium of 36% to the closing price on 8 December. Tom Watson, Labour’s deputy leader and shadow culture secretary, warned of the “likely concentration of further media power in the hands of a single company” and said it would be incumbent on Ofcom and other competition authorities to ensure media plurality was upheld in the UK if the takeover proceeded.
Shares in Sky jumped nearly 30% to £10.26 on the news. “The bid must also be judged on its likely impact on the UK news market and the provision of robust and independent journalism,” he said.
Rupert Murdoch founded Sky in 1989 but the company was merged with rival satellite broadcaster BSB a year later and since then the media mogul has never controlled a majority of its shares. Vince Cable, the former Lib Dem business secretary, said the proposed takeover was a test of the government’s independence from large media owners. When Cable was in government he referred Murdoch’s previous bid to a public interest test in 2010. He said on Friday that the market situation had not changed since.
The owner of the country’s largest newspaper group tried to buy BSkyB in 2010, provoking political and media complaints that it would bring together the largest broadcaster by turnover with the publisher of the Sun and the Times. “The level of plurality in UK media has remained comparable since I referred a similar takeover bid to the competitions authorities in 2010. Nothing seems to have materially changed and if this takeover was to go ahead then there would be similar concerns raised about media plurality in the UK,” he said.
But Murdoch looked like he would prevail with modest conditions attached to the editorial governance of Sky News until the phone-hacking scandal, where public revulsion at the revelations of illegal intrusion forced the media mogul to withdraw his bid the year after. “The way Theresa May’s government deals with this is a test of their independence from the influence of large proprietors. The consultation that has been launched on the implementation of Leveson would suggest there is a tendency for some to bow to the power of media giants – this must not be the case.”
21st Century Fox, Murdoch’s bid vehicle, owns the Fox television and film studios. But it does not own Murdoch’s newspapers which were separated out into a different company, News Corp, following the hacking scandal. If the government does refer the deal to Ofcom, company insiders say 21st Century Fox believes it is in a better position to clear any regulatory hurdles than Murdoch’s previous bid. This, they say, is because the mogul’s newspapers, including the Sun and the Times, have been spun off into a separate company, News Corp, since the hacking scandal. They also argue that the UK media landscape has become more fragmented.
Rupert Murdoch founded Sky in 1989 but after an initial financial crisis, the company was merged with rival satellite broadcaster BSB a year later. Since then the media mogul has retained a substantial stake, but never controlled a majority of its shares.
When Cable announced the public interest test for their 2011 bid, the Murdochs had agreed to spin off Sky News into a company with an independent editorial board. But after it emerged that News of the World journalists had hacked into Dowler’s phone, Conservative, Labour and Lib Dem politicians agreed that a takeover could not proceed and the Murdochs withdrew.
Claire Enders, a media analyst, said a takeover bid had been inevitable since Brexit, because the falling pound meant Sky was far cheaper to a US company paying in dollars.
She said she did not believe Bradley would refer the bid to Ofcom on public interest grounds because the market and company structure had changed. “The circulation of the newspapers – now part of an entirely separate company – have dropped drastically since 2011.”
The European commission, which cleared the previous bids, is also likely to look at the new deal. In 2014, Sky took full control of Sky-branded services in Germany, Austria and Italy, meaning any UK takeover has a European dimension that did not exist before.
The offer proposed by Fox is priced at £10.75 of cash per share, representing a premium of 40% to Sky’s closing price on 6 December, the last business day before the initial proposal had been received from the US company. Immediately after the news of the proposed deal was announced on the London Stock Exchange, shares in Sky soared nearly 30% to £10.26.
Justifying the planned takeover, 21st Century Fox said: “In the past several years, 21st Century Fox has consistently stated that its existing 39.1% stake in Sky is not a natural end position.
“A proposed transaction between 21st Century Fox and Sky would bring together 21st Century Fox’s global content business with Sky’s world-class direct-to-consumer capabilities, which have made it the number one premium pay-TV provider in all its markets.
“It would also enhance Sky’s leading position in entertainment and sport, and reinforce the UK’s standing as a top global hub for content generation and technological innovation.”