Murdoch's Fox ups bid for pay-TV group Sky

Comcast dropped its US$66 billion (S$90 billion) bid for Twenty-First Century Fox's entertainment assets, but said it would still try to buy European broadcaster Sky to increase its international footprint.
Mr Rupert Murdoch already owns 39 per cent of Sky. His 21st Century Fox has been trying to buy Sky since December 2016.
Mr Rupert Murdoch already owns 39 per cent of Sky. His 21st Century Fox has been trying to buy Sky since December 2016.

Rival bidder Comcast expected to counter with higher offer

LONDON • Mr Rupert Murdoch's 21st Century Fox has raised its offer for Britain's Sky in an agreed deal valuing the pay-TV group at US$32.5 billion (S$44.2 billion), seeing off rival Comcast for now.

Fox, which has been trying to buy the pan-European group since December 2016, has offered to pay £14 per share, a 12 per cent premium to Comcast's offer, but below the £14.80 Sky shares were trading at yesterday.

Analysts said the bid threw down the gauntlet for Comcast, the world's biggest entertainment company, to return with a higher offer. The US cable group gatecrashed Fox's bid for Sky in February, forcing the independent directors to drop their original recommendation for Fox's offer. Mr Murdoch already owns 39 per cent of the group.

"It's good for shareholders and will probably be followed by another Comcast offer," consultant Claire Enders said.

The fight for Britain's leading pay-TV group is part of a bigger battle being waged in the global entertainment industry as the world's biggest media giants offer tens of billions of dollars in deals to be able to compete with Netflix and Amazon.

Comcast and Walt Disney are locked in a separate US$70 billion-plus battle to buy most of Fox's assets, which would include Sky.

Present in 23 million homes across Europe, Sky has become a prized asset due to the programmes it creates and the direct relationship it has with customers.

TWISTS AND TURNS

There are enough sub-plots in the race to acquire Sky to commission a prime-time drama.

MR GEORGE SALMON, an equity analyst at Hargreaves Lansdown, on rival bids for Sky from 21st Century Fox and Comcast.

"This transformative transaction will position Sky so that it can continue to compete within an environment that now includes some of the largest companies in the world," Fox said.

Fox's new offer represents an 82 per cent premium to where Sky's shares were trading in December 2016 before Fox agreed its original deal, and a multiple of 21 times 2017 earnings per share.

However, British regulators have indicated that if Disney succeeds in buying Fox, including the 39 per cent stake in Sky, it would be required to offer the same price for the rest of Sky. According to some shareholders, that has set an implied higher floor for Sky's shares.

Hedge funds including Elliott Management have bought into Sky in recent months, and other vocal shareholders, like Mr Crispin Odey, have demanded that the independent directors secure a better deal.

"There are enough sub-plots in the race to acquire Sky to commission a prime-time drama," said Mr George Salmon, an equity analyst at Hargreaves Lansdown.

"Fox coming back in for Sky isn't a surprise in itself, but the fact the offer is slightly behind what some had anticipated brings another twist. In fact, there's every chance it might entice another counter from Comcast."

Fox said the performance of Sky since December 2016, including the renewal of the right to show English Premier League matches at a lower price than expected, justified its higher offer.

The British government is expected to allow Fox to buy Sky this week, after the US group agreed to sell Sky's award-winning news channel to Disney to prevent Mr Murdoch from owning too much of the British media.

Fox, run by Mr Murdoch's son James, who is also the chairman of Sky, has made a string of guarantees to help secure backing for its deal, including investment in British TV production, technology and the protection for Sky News.

REUTERS

A version of this article appeared in the print edition of The Straits Times on July 12, 2018, with the headline 'Murdoch's Fox ups bid for pay-TV group Sky'. Print Edition | Subscribe