The government has given the green light to a takeover of Sky plc, owner of Sky News, by US entertainment giant 21st Century Fox following 19 months of regulatory enquiries.
The decision comes as the bidding war for Sky between Fox and the US cable giant Comcast intensifies.
The new culture secretary, Jeremy Wright, confirmed the decision of his predecessor, Matt Hancock, to allow the takeover to proceed on the basis that Sky News is sold to Disney – which is trying to buy Fox’s entertainment assets, including Sky – or an “alternative suitable buyer” following a 15-day public consultation.
The remedy over Sky News was agreed by Fox and the Department for Digital, Culture, Media and Sport after the Competition and Markets Authority advised that a takeover could act against the public interest because of its impact on plurality of media ownership in the UK. Fox’s biggest shareholder is the Murdoch Family Trust, which is also the biggest shareholder in News Corporation, owner of The Sun, The Times and The Sunday Times.
Disney has already agreed to buy Sky News from Fox and has promised to fund the business to the tune of at least £100m a year for the next 15 years. It has also promised to maintain the editorial independence of Sky News. Comcast has also offered legally binding commitments to preserve the editorial independence and funding of Sky News.
Fox, currently Sky’s biggest shareholder with a 39.1% stake, first said back in December 2016 that it wanted to take full control of Europe’s largest pay-tv broadcaster. It tabled a 1075p-a-share offer that valued Sky at £18.5bn.
The then-culture secretary, Karen Bradley, referred the proposed deal first to Ofcom, the broadcasting and telecoms regulator, before calling in the Competition and Markets Authority for a more detailed investigation.
Mr Wright, the third culture secretary to have oversight of the takeover, said: “[This decision] marks the final stage of the public interest consideration of this case. It is now a matter for the Sky shareholders to decide whether to accept 21CF’s bid.”
Shares of Sky, meanwhile, surged to a new all-time high amid speculation Fox is preparing to raise its offer for the company.
Fox tabled a £14-a-share offer for Sky on Wednesday, valuing the broadcaster at £24.5bn, before Comcast hit back last night with an increased offer of 1475p-a-share that values Sky at £26bn. Comcast had previously tabled a 1250p-a-share offer, valuing Sky at £22.5bn, in February.
Both Comcast and Disney are also fighting it out for Fox’s entertainment assets. Disney’s offer of $71.3bn is currently the highest on the table.
However, most Wall Street analysts believe that the battle for Sky will take priority, as any increase by Comcast or Disney in their offer for the Fox assets would imply an increase in the value applied to Sky – and could prompt the Takeover Panel to ask Fox and Comcast to raise their offers for Sky accordingly.
Shares of Sky were up 42p at 1536p this lunchtime and closed the day at 1526p.
Jerry Dellis, media analyst at stockbroker Jeffries International, said: “Comcast’s new 1475p offer to Sky shareholders is merely the opening shot in an endgame which will gather pace following the granted approval of Fox-Sky by the secretary of state [for culture].
“Until now there was a widely held view that Comcast would refrain from a Sky bidding war, keeping its powder dry to contest Disney for Fox’s entertainment assets. But in raising its offer, Comcast has made clear that it sees Sky as a valuable prize in itself.
“Fox cannot rely on the completion [of the sale of its entertainment assets to Disney] and should be highly motivated to avoid the outcome of being without control of Sky.”
(c) Sky News 2018: 21st Century Fox bid for Sky gets government approval