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UK government rules on Sky takeover bids - business live UK government clears Comcast and Fox takeover bids for Sky – live updates
(35 minutes later)
Liberal Democrat MP Christine Jardine says her party has concerns about Fox’s proposed takeover of Sky.
She welcomes the plan for Sky News to be divested... but wonders if rival bidder Comcast will give similar reassurances about media independence if it wins the battle for Sky.
Matt Hancock replies that Comcast has given undertakings and assurances.
By law, he looked at its bid for Sky because of its material size. He concluded that Comcast’s bid did not raise public interest concerns, so the government will not issue an intervention notice.
Hancock adds that he hopes the Sky takeover battle will reach a conclusion that “demonstrates with confidence” that Sky News will be independent and viable, so parliament can be content with the state of media plurality in future.
Back in parliament, Labour MP Chris Bryant has criticised the proposal for Sky News to be sold off if 21st Century Fox wins the takeover battle for Sky.
He warns that Sky News could be starved of money by whoever buys it (either Disney or another owner). So, in a few years they’ll come back to the government and ask to be subsumed back into Fox.
To laughter, Bryant suggests that Matt Hancock could even find himself facing a TV news veteran at the polling booth.
Kay Burley will be out of a job, and she’ll stand in West Sussex and defeat him, because most people in this country would prefer a diversity of ownership of media and we want to keep Sky as independence as possible.
Hancock replies that he relishes the prospect of a contest in West Sussex with anyone (!) but doesn’t accept that Sky News will be starved of funds in the future.
Here’s a clip of Tom Watson telling parliament that Labour has serious concerns about the proposed sale of Sky News, and that the channel’s ‘independent and rigorous’ independence must be protected.
Deputy Labour leader Tom Watson says the priority must be to ensure Sky News retains its independence and "thrives going forward" pic.twitter.com/T4If62oZjH
Here’s our media editor, Jim Waterson, on today’s announcement:
The UK government has approved a bid from US media giant Comcast to take over Sky, while indicating it is minded to approve a rival bid from Rupert Murdoch’s 21st Century Fox providing it sells Sky News to another organisation.
The decisions are likely to set up a multibillion-pound bidding war for the British broadcaster.
Fox is attempting to buy the 61% of Sky that it does not already own, in a deal valuing the company at £18.5bn, but the bid has been complicated by concerns that it would leave Murdoch with too much control over the UK media.
Comcast, which owns US TV network NBC and Universal Studios, made a rival bid earlier this year that valued Sky at £22bn.
The culture secretary, Matt Hancock, approved the Comcast deal in a statement in the House of Commons, while indicating he will also approve the Murdoch deal if Sky News is offloaded to an appropriate buyer in order to avoid excessive influence by the the mogul’s family over the UK news business.
Here’s his full story:
Rupert Murdoch’s 21st Century Fox has also welcomed the government’s decision.
In a statement to shareholders, 21CF says it has already submitted plans to sell Sky News to Disney (to address those concerns about media plurality).
Here’s its statement:
21st Century Fox (“21CF”) welcomes today’s announcement by the Secretary of State for Digital, Culture, Media and Sport that he has cleared 21CF’s proposed acquisition of the remaining shares in Sky on broadcasting standards, as recommended by the Competition and Markets Authority (“CMA”).
Regarding the effects on media plurality we note that the CMA recommended to the Secretary of State that divestiture is “the most effective and proportionate remedy”.
21CF has already submitted proposed undertakings to achieve the divestiture of Sky News to Disney. We note that the Secretary of State agrees with this solution and has instructed officials from the Department for Culture, Media and Sport (“DCMS”) to agree final undertakings that he would be prepared to accept and consult on within the two-week timeframe.
We now look forward to engaging with DCMS and we are confident that we will reach a final decision clearing our transaction.
Sky says it welcomes Matt Hancock’s announcements (not a surprise, as it paves the way for a full-blooded takeover battle for the company).
It adds:
In respect of 21CF’s proposed acquisition of Sky, Sky notes that the Secretary of State considers that the undertakings provided by 21CF have provided a good starting point to overcome the adverse public interest effects of the proposed merger that he has identified, and that DCMS Officials have now been instructed to seek to agree final undertakings with 21CF.
The Secretary of State has stated that, dependent on the outcome of these discussions, he would hope to be in a position to consult on any agreed final undertakings within the next two weeks.
Shadow culture secretary Tom Watson is responding to Hancock now.Shadow culture secretary Tom Watson is responding to Hancock now.
He warns that selling Sky News to Disney could backfire, if the planned takeover of 21 CF by Disney should collapse. This could leave Sky News vulner He warns that selling Sky News to Disney could backfire, if the planned takeover of 21 CF by Disney should collapse. This could leave Sky News vulnerable.
The CMA’s and Hancock have concluded that that the takeover would not threaten broadcasting standards. Watson, though, queries this view.The CMA’s and Hancock have concluded that that the takeover would not threaten broadcasting standards. Watson, though, queries this view.
He suggests that upcoming court cases brought against The Sun could show maladministration by Fox, which might make the minister change his view.He suggests that upcoming court cases brought against The Sun could show maladministration by Fox, which might make the minister change his view.
Now onto 21 Century Fox’s takeover bid for Sky.Now onto 21 Century Fox’s takeover bid for Sky.
Matt Hancock tells MPs that the Competition and Markets Authority has concluded that 21CN’s bid could operate against the public interest, for two reasons:Matt Hancock tells MPs that the Competition and Markets Authority has concluded that 21CN’s bid could operate against the public interest, for two reasons:
potential erosion of Sky News’s editorial independence.potential erosion of Sky News’s editorial independence.
Increased influence of Murdoch family trust on public opinion and the UK’s political agenda.Increased influence of Murdoch family trust on public opinion and the UK’s political agenda.
Hancock says various remedies have been proposed.Hancock says various remedies have been proposed.
He says that the idea of divesting Sky News to Disney [which is hoping to take over 21st Century Fox] or to an alternative provider with funding for at least 10 years, is the most proportionate and effective remedy to address these concerns.He says that the idea of divesting Sky News to Disney [which is hoping to take over 21st Century Fox] or to an alternative provider with funding for at least 10 years, is the most proportionate and effective remedy to address these concerns.
Hancock is saying he will approve 21 Century Fox’s bid for Sky can proceed - if he is satisfied that Sky News’ independence is guaranteed.Hancock is saying he will approve 21 Century Fox’s bid for Sky can proceed - if he is satisfied that Sky News’ independence is guaranteed.
BREAKING: U.K. secretary will approve Fox taking over rest of Sky IF they divest Sky to Disney or alternative buyer… it ‘is likely to be most…effective remedy for public interest concerns…’BREAKING: U.K. secretary will approve Fox taking over rest of Sky IF they divest Sky to Disney or alternative buyer… it ‘is likely to be most…effective remedy for public interest concerns…’
Hancock says he has asked officials to begin immediate discussions with 21 CF to draw up a final proposal for Sky News to be divested in a satisfactory way.Hancock says he has asked officials to begin immediate discussions with 21 CF to draw up a final proposal for Sky News to be divested in a satisfactory way.
SoS backs divestment of Sky News to Disney or Comcast but wants further assurances on this from FoxSoS backs divestment of Sky News to Disney or Comcast but wants further assurances on this from Fox
sky news should be divested to ensure proportional and effective remedy on media plurality concerns over Fox Bid for Sky TV- culture secretarysky news should be divested to ensure proportional and effective remedy on media plurality concerns over Fox Bid for Sky TV- culture secretary
No intervention in Comcast's bid for Sky, Matt Hancock confirmsNo intervention in Comcast's bid for Sky, Matt Hancock confirms
Culture minister Matt Hancock says he has considered Comcast and 21 Century Fox’s bids for Sky separately.Culture minister Matt Hancock says he has considered Comcast and 21 Century Fox’s bids for Sky separately.
Comcast first.... Hancock rules that the deal does not does not raise public interest concerns.Comcast first.... Hancock rules that the deal does not does not raise public interest concerns.
So, he will not be issuing an intervention notice. That’s a green light for Comcast!So, he will not be issuing an intervention notice. That’s a green light for Comcast!
Heathrow questions are finally over.Heathrow questions are finally over.
Matt Hancock has descended from his holding pattern and is giving his statement on the Sky takeover now.Matt Hancock has descended from his holding pattern and is giving his statement on the Sky takeover now.
Matt Hancock will give his decision on the Sky takeover once transport secretary Chris Grayling finishes answering questions from MPs about Heathrow Airport.Matt Hancock will give his decision on the Sky takeover once transport secretary Chris Grayling finishes answering questions from MPs about Heathrow Airport.
The government has decided to back plans to build a third runway at Heathrow, after years of prevarication.The government has decided to back plans to build a third runway at Heathrow, after years of prevarication.
Plenty of MPs want their say. Some support the plan -- as do unions and business groups. But other MPs (especially with constituencies in or near West London) are very worried about the environmental impact.Plenty of MPs want their say. Some support the plan -- as do unions and business groups. But other MPs (especially with constituencies in or near West London) are very worried about the environmental impact.
It’s also ironic that London is getting another runway while the railways network in the North of England suffers severe disruption after decades of under-investment.It’s also ironic that London is getting another runway while the railways network in the North of England suffers severe disruption after decades of under-investment.
Our Politics Live blog has the details:Our Politics Live blog has the details:
The Financial Times predicts that both Sky takeover offers will get the green light from the government today.The Financial Times predicts that both Sky takeover offers will get the green light from the government today.
The FT’s Matthew Garrahan explains:The FT’s Matthew Garrahan explains:
The fate of competing bids for Sky by 21st Century Fox and Comcast will become clear today when culture secretary Matt Hancock delivers the UK government’s verdict on whether to block or clear each offer.The fate of competing bids for Sky by 21st Century Fox and Comcast will become clear today when culture secretary Matt Hancock delivers the UK government’s verdict on whether to block or clear each offer.
Fox, which is controlled by Rupert Murdoch, has been embroiled in regulatory scrutiny for 18 months with its bid to take full control of Sky, offering £10.75 a share, valuing the company — which was founded by Mr Murdoch — at about £18.5bn. Comcast made a competing offer earlier this at £12.50 a share, which valued Sky at about £22bn.Fox, which is controlled by Rupert Murdoch, has been embroiled in regulatory scrutiny for 18 months with its bid to take full control of Sky, offering £10.75 a share, valuing the company — which was founded by Mr Murdoch — at about £18.5bn. Comcast made a competing offer earlier this at £12.50 a share, which valued Sky at about £22bn.
Mr Hancock is expected to clear both bids — possibly with some conditions attached — setting the scene for a bidding war for Sky.Mr Hancock is expected to clear both bids — possibly with some conditions attached — setting the scene for a bidding war for Sky.
Separately, Fox and Comcast are embroiled in another takeover tussle: Walt Disney is attempting to buy Fox’s entertainment assets — including its 39 per cent stake in Sky — in a deal worth $66bn including debt.Separately, Fox and Comcast are embroiled in another takeover tussle: Walt Disney is attempting to buy Fox’s entertainment assets — including its 39 per cent stake in Sky — in a deal worth $66bn including debt.
More here.More here.
Breaking away from the RBS share sale, the UK government is about to rule whether either Rupert Murdoch or US conglomerate Comcast - or both - should be allowed to take full control of broadcaster Sky.
Culture minister Matt Hancock will make a statement on the situation in parliament shortly.
Murdoch’s 21 Century Fox (21CF) currently owns 39% of Sky, and launched a full takeover bid in December 2016.
However, the bid has been held up by concerns that it will give Murdoch too much control on the UK media landscape.
In January, the Competition and Markets Authority said 21st Century Fox’s bid was not in the public interest due to concerns about media plurality. Fox has since offered some concessions, such as making Sky News a legally separative business.
Comcast launched its own bid for Sky in April. It could potentially derail Murdoch’s plan to sell most of 21CF to Disney in a $66bn (£47bn) deal.
So Hancock’s decision could be extremely significant for Sky’s future, and the wider media landscape....
If you’re just tuning in, here’s our economics editor Larry Elliott on today’s RBS share sale:
Philip Hammond has been forced to defend the government’s decision to sell part of its stake in RBS after an overnight sale of shares left taxpayers nursing a £2bn loss.
The chancellor said the offloading of almost 8% of the company’s shares for £2.5bn was a significant step in returning the high street bank – bailed out by Labour during the depths of the 2008 financial crisis – to the private sector.
But the sale of 925m shares at 271p each was at a price significantly lower than the 502p at which the Treasury bought its stake a decade ago and led to criticism that ministers had sold at the wrong time.
Hammond said: “This sale represents a significant step in returning RBS to full private ownership and putting the financial crisis behind us. The government should not be in the business of owning banks. The proceeds of this sale will go towards reducing our national debt. This is the right thing to do for taxpayers as we build an economy that is fit for the future.”
John McDonnell, the shadow chancellor, said: “There is no economic justification for this sell-off of RBS shares. There should be no sales of RBS shares, full stop. But particularly with such a large loss to the taxpayers who bailed out the bank.
Prem Sikka, emeritus professor of accounting at the University of Essex, said: “Why sell? Taxpayers bailed out the bank and when there is a glimpse of recovery and profits, the government sells it at a loss to ensure that profits are collected by its friends in the City.”
Shares in RBS have not traded above the price the government bought them at since 2010 and never once hit the 625p-a-share break-even price calculated by the National Audit Office (NAO) to take into account the cost of finance.
More here: Hammond forced to defend RBS shares sale after £2bn loss to taxpayers
Hammond forced to defend RBS shares sale after £2bn loss to taxpayers https://t.co/JQRGmjkUGU
Laith Khalaf, Senior Analyst, Hargreaves Lansdown, reminds us JUST HOW BIG Royal Bank of Scotland had become after years of dealmaking under the leadership of Fred Goodwin.
‘It’s now clear the losses sustained by the taxpayer on the RBS bailout are going to be substantial, though this really reflects the price paid for financial stability in the depths of the global banking crisis. In essence the RBS bailout cushioned the blow of the financial crisis, and spread the pain across many years, a decision which is now beginning to become more measurable.
We will never know what the outcome would have been if RBS had been allowed to fail, though it’s important to recognise the scale of RBS at the time. The bank may have its roots in the cobbled streets of Edinburgh, but it became one of the world’s biggest banks, with a £2.4 trillion balance sheet at the height of its power.
To put that number in context, it’s bigger than the annual output of the whole UK economy and compares with the $639 balance sheet of Lehman’s Brothers just before it filed for bankruptcy. It’s just possible therefore that the collapse of RBS could have taken all the other dominos with it. Clearly the losses that are now being sustained on the government shareholding are deeply unwelcome, but the alternative to a bailout might have been far worse.’
My colleague Richard Partington has been crunching the numbers...
Though the RBS share sale comes at a steep loss to the 08/09 bailout - it's priced at only just below what RBS reckons the value of all of its assets would add up to if they were divided between each shareholder - of 274p...
...In order to get anywhere near 502p (the avg. price paid in the bailout) RBS would need to see its shares rise to almost twice the value of its assets per share - which no other major UK bank has achieved since the crisis...
... In other words, we will be waiting for a very long time to get our money back on RBS (if we want to)
The political debate can be summed up: If it's an investment - do you want to sell RBS at a loss and use that cash more productively over the time you would otherwise be waiting to sell for a higher value? ...
... Or you might argue it shouldn't be seen as an investment, and that the state can use its ownership to morph RBS into something different. That's if you think UK banks don't do what you want them to do in the economy...
The Unite union have blasted the government over today’s share sale.
Rob MacGregor, Unite national officer, says Philip Hammond and colleagues should use their power as majority shareholders to improve the bank, not sell out at a loss:
“The government is attempting to wash its hands with Royal Bank of Scotland at the expense of the taxpayer. This bargain basement sale of over seven per cent of the bank’s shares is a betrayal of public finances and represents a total loss of over £3 billion for taxpayers since the original bail-out in 2008.
Staff are clear that the government should be focusing its attentions on keeping RBS bank branches open and improving the corporate governance of this institution.
“The catalogue of failures across the bank ranging from thousands of staff cuts, closing hundreds of bank branches and also the sale of financial products which resulted in the $4.9 billion US fine demonstrates the systematic failures by the management to effectively run this organisation. Staff across the business are continuing to pay for the mistakes at the top whilst the government merely looks the other way.”
Labour’s shadow City minister, Jonathan Reynolds, argues that the government is selling up at precisely the wrong moment:
Why did the Treasury sell #RBS shares last night when the bank’s fundamentals are finally improving after the US fine settlement? Taxpayers, as major shareholders, deserve to know.
He’s referring to the $4.9bn (£3.6bn) penalty which the US Department of Justice hit RBS with last month, for misselling toxic securities in the run-up to the financial crisis.
That fine was smaller than expected, so one of the biggest clouds over RBS has finally lifted. That should give the bank’s shares a lift in the coming months.
Then again.... there’s still the risk that the UK economy falls into recession, especially if Brexit turns out badly.
Jane Sydenham, Investment Director at City firm Rathbones, argues that Philip Hammond is wise to sell some shares while he can:
With the economy in relatively good shape and interest rates likely to rise in the not-too-distant future, it’s a good time for the government to start selling the RBS stock.
Although the sale of stocks is still loss-making for the tax payer, it’s important that the government gets as much back as possible while they can, instead of waiting too long and potentially seeing the economy move into trouble again. With this risk in mind, there is no point waiting even if it does mean accepting a loss.
I’ve just realised that the true break-even price of the RBS bailout is even higher than I thought.
The 625p break-even point was set by the National Audit Office last summer, when it assessed the government’s first sale of RBS shares in 2015.
It is based on the cost of the government borrowing £45bn to fund the RBS bailout (the NAO estimated that UK bonds were being sold at 3.7% per year at the time.)
So, that figure includes the financial cost of the rescue. But, it doesn’t cover the additional cost of repaying the debt since 2015.
As this NAO chart shows, the true cost of the bailout keeps rising the longer the taxpayer holds onto its shares. So the break-even price could already be closer to £7....
In City jargon, the government sold part of its stake in RBS through an “accelerated bookbuilding process to institutional investors”
In practice, that means 925m shares were sold to banks, hedge funds, pension funds, insurance companies, and other organisations who manage our money.
Citigroup, Goldman Sachs and J.P. Morgan all acted as ‘bookrunners’ for the placing, which means they persuaded the institutional investors to take part (readers can speculate why it takes THREE investment banks to handle this sort of thing.....).
Economics journalist Dharshini David points out that the buyers will probably make a profit (once RBS’s shares rise above 271p).
Who has lost out/profited from RBS bailout?Losers: UK taxpayers after today's salesPoss winners: institutional shareholders with whom shares placed (will likely only sell on when profitable).
Some critics say the government is wasting a great opportunity by simply selling their stake in Royal Bank of Scotland.
Labour MP Gareth Thomas argues that the Treasury could turn the bank into a building society with a remit to help the UK economy:
Unbelievable, ‘almost criminal’ loss of power and money; would have been better to turn @RBS into a new building society rather than simply reprivatise at huge cost to the taxpayer @bsaceo @CoopParty @SDoughtyMP @JimMcMahon https://t.co/AjIyO25aeQ
Positive Money, a group which campaigns for a fairer banking system, argues that RBS should be broken up.
Fran Boait, executive director of Positive Money, says today’s share selloff is a ‘colossal wasted opportunity’.
As well as losing the taxpayer billions of pounds, the government is also losing the ability to reshape Britain’s banking system.
“Instead of selling off its majority stake, the government should use its position to break up RBS into smaller, regional banks, with alternative business models that emphasise lending to SMEs and productive industry.
“Such innovation is needed to direct lending to the real economy, which has been been starved of investment in recent years.”
Graham Spooner, investment research analyst at The Share Centre, recommends that RBS investors hold onto their shares.
Spooner argues that the bank’s financial performance is improving, so it should resume paying dividends to investors soon.
Spooner says:
“Institutional shareholders paid more or less the market price [in today’s sale] so they must have some confidence in the banks longer-term recovery. As well as this, the bank could be a step nearer to paying a dividend.
“The negative is that the government still have a large holding of 62.4% which is set to overhang the market for some time; the government cannot sell any more for 90 days.
“While shares are up slightly from a year ago off the back of improved performance and improved confidence leading to a change in our recommendation from a ‘sell’ to a ‘hold’, shares in early trading this morning have fallen by 3.4%. We maintain our ‘hold’ recommendation due to the increased likelihood of a dividend payment and the CEO’s restructuring plans.”