21st Century Fox raises offer for Sky
Comcast considers focusing on European operator and dropping pursuit of Fox assets
LONDON—Rupert Murdoch’s
21st Century Fox Inc. significantly lifted its offer price to consolidate ownership of Sky PLC, heating up a bidding war with Comcast Corp. for the British broadcaster.
Fox raised its bid for the roughly 61% of Sky it doesn’t already own by more than 30%, to £14 a share, in a deal that values all of Sky at £24.5 billion ($32.5 billion U.S.). Fox said Sky’s independent directors have agreed to the new offer.
The bid tops a rival offer from Comcast, which is competing with Fox for Sky and could come back with a higher offer, still. Comcast is also competing with Walt Disney Co. in a bidding war for a big chunk of Fox assets, including the 39% stake in Sky. Fox’s higher bid for Sky, disclosed early Wednesday, essentially bolsters Fox’s agreement to sell those assets to Disney.
Mr. Murdoch’s Fox launched its bid for all of Sky more than 18 months ago. Since then, the deal has been embroiled in a U.K. government review, which was expected to draw to a close later this week. More recently, the pursuit morphed into one of the main flashpoints in a much larger corporate battle, pitting Disney against Comcast.
Both media giants have lobbed competing bids for many of the assets that now comprise Mr. Murdoch’s Fox. That includes the 39% stake in Sky. Both Disney and Comcast view Sky as a route to expand their media and distribution channels overseas.
Comcast has made its own, separate bid for all of Sky, offering £12.50 a share, a steep
premium to Fox’s original bid of £10.75.
A Comcast representative declined to comment Wednesday.
Sky shares were up 0.8% Wednesday afternoon at £15.14 after falling earlier in the day.
That is well above the new Fox offer, suggesting investors are betting on a fresh bid from Comcast, or an even-higher eventual offer from Fox. Under the terms of the new pact Fox said it reached with Sky’s independent directors, Fox requires support from 75% of Sky’s non-Fox shareholders.
The deal, though, continues to keep the door open for a more streamlined approach — should the two sides decide to change the structure of the deal under U.K. law. Such a change would allow a simple majority of all shareholders
to wave the deal through. Given the big difference in Fox’s offer and the current share price, however, it may be a struggle to get even this level of support.
A number of hedge funds, including American activist investor Elliott Management Corp., have bought into Sky, and would likely oppose any bid they felt undervalued Sky.
Sky’s current stock-market value reflects, in part, an implied premium from Disney’s latest, higher offer for Fox assets.
The U.K. Takeover Panel, a regulatory body that polices corporate deal making, could force Fox to raise its bid further, based on a calculation of Sky shares derived from the Disney offer. The panel has said it would make a ruling on the matter, but didn’t say when.
In some ways, the battle for Sky has become a proxy for the bigger media war between Disney and Comcast for the wider portfolio of Fox assets. Fox first agreed to sell those assets to Disney for $52.4 billion in cash and stock. Comcast swooped in offering $65 billion in cash, prompting Disney’s latest cash-and-stock offer of $71.3 billion.
The Wall Street Journal reported late last month that Comcast was considering a range of options, including dropping its pursuit of Fox, offering a higher bid on its own or tapping partners to join the fray should bidding approach the $90 billion range.
Sky is one of the crown jewels of Mr. Murdoch’s media empire. It could help both Disney and Comcast — even without the other Fox assets — compete with new entrants like Netflix Inc.
Sky produces its own content while its satellite and broadband offerings reach millions of European households. That combination — content and distribution — has driven years of consolidation in the U.S. Sky offers both Disney and Comcast a rare vehicle to boost that outside the country.
Fox is still awaiting final approval from London to pursue the deal — a green light many expect this week.
The government had been weighing for months whether Fox’s consolidation of Sky — which operates a popular news channel in the U.K. — would constitute an overconcentration of ownership among British news media. Mr. Murdoch and his family are major shareholders in 21st Century Fox as well as News Corp, which owns several large U.K. newspapers. News Corp also owns The Wall Street Journal.
The U.K. culture minister has indicated a separate deal by Fox to sell Sky News to Disney would be sufficient in preventing any overconcentration of ownership.
Fox said it had obtained previous consent from Disney for the higher offer. Fox will take on larger debt to fund the deal. That liability will ultimately fall to Disney, assuming it completes its deal for Fox.
Mr. Murdoch also hedged his bets to some extent. Fox said that in the event the Disney and Fox deal falls apart because of regulatory issues, Disney will pay Fox £1 for every share of Sky that Fox buys as part of Wednesday’s higher offer. That caps Fox’s real exposure to £13 a share, should it not end up being acquired by Disney.