Fox takeover of Sky referred for six-month CMA investigation

Fox takeover of Sky referred for six-month CMA investigation

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Karen Bradley, the Secretary of State for Culture, Media and Sport, has referred 21st Century Fox’s £18.5bn takeover of Sky plc, the owner of Sky News, to the UK’s main competition watchdog.

Ms Bradley said on Tuesday that she was “minded to” refer the bid to the Competition and Markets Authority (CMA) but gave both companies 10 working days to respond to her.

She told MPs on Thursday that, yesterday, she had received letters from both Fox and Sky confirming that, while they disagreed with that decision, they would “not be making substantive representations in relation to it”.

Ms Bradley said: “As a result, I can confirm my decision is to refer the merger to the CMA for a Phase 2 investigation on media plurality and genuine commitment to broadcasting standards grounds.”

The CMA is likely to take six months in which to decide whether the takeover can go ahead.

Fox, the world’s fourth-largest media company after Comcast, Disney and Time Warner, already owns a 39.1% stake in Sky.

It tabled a proposal just before Christmas last year to buy the remainder of the company for £11.7bn, valuing the whole of Sky at £18.5bn.

In March, Ms Bradley asked Ofcom, the media and telecoms regulator, to investigate, under the 2002 Enterprise Act, whether the takeover was in the public interest on the grounds of media plurality and broadcasting standards.

Ofcom said there was no reason to think the deal was against the public interest on broadcasting standards grounds but indicated it did have concerns on plurality of media ownership.

Ms Bradley was subsequently lobbied by a number of opponents of the deal, led by Ed Miliband, the former Labour leader and Sir Vince Cable, the Liberal Democrat leader and former business secretary, to assess new evidence concerning Fox’s US operations and look into whether this would justify a referral to the CMA on grounds of broadcasting standards.

Ofcom said earlier this week there were no grounds for referring the bid to the CMA on that issue – but Ms Bradley, in what has been seen as a hardening of the government’s stance over the deal, insisted she was still minded to make a referral to the CMA.

Her decision has led to criticism in some quarters.

In an editorial column, published on Thursday, the Financial Times described Ms Bradley’s decision as “bizarre”.

It added: “The suspicion is that Ms Bradley, having not found Ofcom’s ruling to her taste and under pressure from the Labour opposition, has decided to see if another regulator delivers a more expedient judgement. This sends a deeply troubling message to any business seeking to invest in Britain at a time of great uncertainty.

“With Brexit looming, investors need predictability and confidence in due process. The Fox-Sky bid demonstrates neither.”

Shares of Sky, which are valued at 1075p each under the proposed takeover, were up 2p at 934p in mid-morning.

That represents a discount of more than 13% to the offer price – suggesting scepticism among investors that the takeover will go ahead.

Fox, the international film and television giant behind hit shows like The Simpsons and Modern Family, said: “We look forward to engaging constructively with the CMA, as independent authority, and hope the findings of this process will be respected by the Secretary of State.”

It said that, subject to further delays in the decision-making process, it anticipated that the deal would be closed by the end of June next year.

Sky, which has previously been critical of delays to the process, said today: “We note the swift decision to now refer this to the CMA and will continue to engage constructively in the process.”

A separate competition review by the European Commission has already given a green light to the takeover. The deal has also been cleared by all of the other countries – Germany, Austria, Ireland and Italy – in which Sky broadcasts.

(c) Sky News 2017: Fox takeover of Sky referred for six-month CMA investigation