Sky Takeover Explained/ 4:40 am ET August 23, 2018 (Dow Jones) Print
British pay-TV group Sky PLC has become the target of a bidding war involving some of the world's largest media companies.
NBCUniversal Inc.'s owner, Comcast Corp., raised its offer to buy
all of Sky to GBP25.9 billion on July 11.
The move came just hours after Rupert Murdoch's 21st Century Fox Inc., which already owns 39% of Sky,
increased its original bid to consolidate ownership of the
U.K. company. The intensified bidding made the fight for control
of Sky a central battlefield in the broader clash between Comcast
and Walt Disney Co.
to acquire most of Fox's entertainment assets, until Comcast dropped its pursuit of the Fox assets.
WHO'S WHO?
Sky is Europe's largest pay-TV operator, with operations in seven countries. It had more than 23 million customers as of June 30, 2018.
In the fiscal year to the end of June, Sky had revenue of GBP13.59 billion and a pretax profit of GBP864 million.
Fox is an American TV and entertainment group controlled by the
Murdoch Family Trust, which also controls Dow Jones's parent,
News Corp, as well as several U.K. newspapers among other properties.
On June 20, Fox agreed to sell most of its assets to Disney--
including the Sky interest. A previous deal reached in December,
was challenged by Comcast,
which dropped its pursuit of the assets on July 19.
Comcast is an American cable juggernaut that owns NBCUniversal as
well as the Xfinity cable and telecommunications service.
It attempted to buy Fox's entertainment assets, making an
unsolicited bid for them on June 13, but walked away weeks later.
It continues to seek the acquisition of Sky.
Walt Disney is the American media conglomerate that houses the
namesake Disney brand,
Star Wars franchise owner Lucasfilm, U.S. sports channel ESPN
and Marvel in its portfolio.
Disney said on June 20 that it would assume full-ownership of Sky
if Fox buys the stake it doesn't own prior
to completion of the deal between the two American companies.
WHY SKY?
With a market value of GBP26.06 billion as of July 30,
Sky has a more modest scale than its American suitors.
But it is in many ways a smaller version of what American media companies are trying to become:
an integrated distribution platform that produces its own content.
HOW IS THE DEAL STRUCTURED?
Comcast has lifted its offer price for Sky to GBP14.75 a share,
valuing the company at $34 billion.
That represents a 5% premium to Fox's latest offer and an
18% increase to Comcast's previous GBP12.50-a-share bid .
Comcast said its latest offer was recommended by Sky's independent directors,
who withdrew their earlier support of the Fox bid.
Fox had raised its original bid by 30% to GBP14.00 a share for
the 61% of Sky it doesn't already own.
Fox launched its bid to consolidate ownership of the
U.K. satellite-TV company in December 2016.
However, the deal came under the scrutiny of British regulators,
who after a lengthy review formally cleared it on July 12.
Fox agreed to sell Sky's news operations to Disney with a promise
to fund the news service
with at least GBP100 million a year for 15 years,
to ease government's concerns that a Sky takeover would give the
Murdoch family too much influence over U.K. media.
Fox said on Aug. 7 that the deal is dependent on approval from shareholders representing 75% of Sky shares
that it doesn't currently hold.
However, Fox said it reserves the right to reduce the acceptance condition to a level not less
than a simple majority of all Sky shares.
WHAT TOOK SO LONG?
Fox launched its bid to consolidate ownership of Sky in December 2016, but the deal was held up by British regulators.
In December 2017, Fox agreed to sell most of its assets--
including its current 39% stake in Sky--to Disney. From then on,
the fate of the Sky takeover was linked to that of the much larger
fight for the Fox assets.
Comcast, which had tried to strike a deal with Fox for its
entertainment assets, emerged as a suitor for Sky in February, confirming a takeover proposal in April. In June, Comcast made a separate, unsolicited offer for the Fox assets as a whole.
The Comcast move triggered a higher offer from Disney for those assets, which was accepted by Fox.
Disney said then that it would take full ownership of Sky upon completion of the Fox deal,
if Fox ended up buying the 61% of the U.K. company it doesn't own.
Fox, backed by Disney, increased its offer on July 11,
but Comcast quickly responded with a higher offer,
which received the support of the Sky independent directors.
Days later, Comcast dropped its pursuit of the Fox assets
and said it would focus on buying the British pay-TV group.
Shareholders of Disney and Fox approved the $71 billion deal
between the two companies on July 27.
Mr. Murdoch's first attempt to take over Sky at the beginning of
the decade failed amid a public and political backlash over
his now-defunct U.K. tabloid newspaper
News of the World's phone-hacking scandal.
WHAT'S NEXT?
Comcast has extended the period for Sky shareholders to accept its
offer until 1200 GMT on Sept. 12
after receiving acceptances for just 0.21% of Sky shares by the
first deadline of Aug. 22.
Fox published its own offer documents on Aug. 7,
triggering a 46-day deadline to revise its bid.
Under U.K. takeover rules,
Fox will now have until Sept. 22 to raise its proposal and
try to outbid Comcast.
The first closing date for Sky shareholders to accept Fox' offer is Sept. 17.
Separately, the U.K. Takeover Panel has ruled that Disney would
be required to offer GBP14.00 a share for 61% of Sky
if it succeeds in acquiring Fox's entertainment assets,
setting a new floor price in the bidding war for the British media group.
The regulatory body confirmed its decision on Aug. 3 after a
hearing requested by various interested parties,
but on Aug. 8 the panel said it would consider appeals lodged
by several interested parties against the ruling.
It has scheduled a hearing to consider the appeals for Aug. 15
Analysts have speculated that Disney could reach an agreement
with Comcast and cede the European business to the cable company.
However, Disney Chief Executive Robert Iger indicated on Aug. 7
that he wanted to win Sky,
citing it as one of Fox's international assets that fits into
Disney's "global growth strategy."
Stu Woo and Ben Dummett contributed to this article.
(END) Dow Jones Newswires
August 23, 2018 04:40 ET (08:40 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
