Setback to Fox’s planned US$16.3bil takeover of Sky

UK regulators say deal will result in Murdoch getting too much power

LONDON: UK regulators dealt a setback to 21st Century Fox Inc’s planned £11.7bil (US$16.3bil) takeover of Sky Plc, saying the deal would give Rupert Murdoch too much control over the country’s media.

Fox’s bid to buy the European pay-TV broadcaster wouldn’t be in the the public interest, the Competition and Markets Authority (CMA) said in provisional findings in which it called for the companies to offer remedies.

Any concessions could include divesting Sky News or insulating the channel from Murdoch’s influence, the CMA said.

The decision is another impediment for the Murdochs, who have seen the transaction hit by unexpected regulatory delays and a furore over sexual harassment allegations at Fox News in the United States.

Now they face negotiations with antitrust officials and politicians to get the Sky deal through, with the aim of ultimately selling the company on to Walt Disney Co.

“Media plurality goes to the heart of our democratic process,” said Anne Lambert, chair of the CMA investigation group.

“It is very important that no group or individual should have too much control of our news media or too much power to affect the political agenda.”

Fox said in a separate statement that it was disappointed with the CMA’s findings on media plurality. “We will continue to engage with the CMA ahead of the publication of the final report in May,” Fox said.

Fox and Sky can discuss possible remedies with the CMA before the regulator delivers its ultimate verdict on the deal to Culture Secretary Matt Hancock by May 1. Hancock has the final say on whether to clear the merger.

The CMA opposition to Murdoch comes even though Sky is likely to be absorbed by Disney as part of a US$52.4bil transaction within months of the completion of the Fox deal. But the regulators said that they couldn’t take the second merger into account.

Any antitrust review of the Disney deal “is unlikely to be completed until well after our inquiry has concluded,” the CMA said. “It is therefore uncertain whether, when or how the Disney transaction will be completed.”

In a previous review by communications watchdog Ofcom, Fox offered to create an independent editorial board for Sky News to address concerns over Murdoch’s media influence. Ofcom said the offer mitigated its concerns, though the proposal could be strengthened.

The CMA is inviting submissions on that proposal, plus other possible remedies such as a sale of Sky News, or blocking the transaction altogether. Sky said that it would look at possible remedies to address the CMA’s issues.

In a boost for Fox, the regulators cleared the transaction on the grounds of Fox’s commitment to broadcasting standards.

The CMA said allegations of sexual harassment against Fox News employees in the US were serious but were not directly related to Fox’s broadcasting record.

Fox, which currently holds a 39.1% stake in Sky, has agreed to sell the London-based broadcaster on to Disney as part of the FoxDisney merger revealed last month.

If the Fox-Sky deal isn’t completed, Disney will only pick up Fox’s 39.1% holding in Sky. — Bloomberg