Will a revolt scupper Murdoch’s latest bid to buy Sky?

WHAT’S GOING ON? 21ST Century Fox has approached Sky over a possible takeover that would value the UK-based broadcaster at £18.5bn.

The US media giant, which is controlled by Rupert Murdoch and his family and already owns 39pc of Sky, wants to buy the rest of the company for £10.75 a share or £11bn. The independent directors of both companies have agreed on the offer price but it is yet to be ratified by shareholders.

The deal would bring together Fox’s 20th Century Fox film studio and Fox TV network with Sky’s operations which include Sky Deutschland and Sky Italia.

It would give Fox control of a pay TV network serving 22m households in Britain, Ireland, Austria, Germany and Italy. WHY HAS FOX BID? SKY Television was set up by Rupert Murdoch in 1989, offering nine channels, including Sky News, but soon ran into financial trouble.

The firm merged with rival British Satellite Broadcasting a year later to create BSkyB and the combined company listed on the stock market in 1994.

This reduced the Murdoch stake to 39pc through the parent company News Corporation.

The Murdoch family has long wanted to take back full control of Sky and launched a bid to do so in 2010. Months later, News Corporation was forced to abandon the bid for Sky amid public outrage at the phone-hacking scandal at its newspaper arm, which owned the News Of The World.

The deal was also opposed by politicians who feared it would give the Murdoch empire too much control over the media in the UK. WHO OWNS SKY? AFTER the failed takeover News Corporation was split in two. Murdoch’s film and television interests, including 20th Century Fox and the Fox TV network as well as the 39pc stake in Sky, became part of 21st Century Fox. Despite the large shareholding Sky remains a separate company with its shares listed in London.

The other company formed in the split is made up of the publishing arm which is still called News Corporation. The group owns the newspaper businesses including The Sun, The Times and the Wall Street Journal.

But the Murdoch family still has an iron grip over both companies with Rupert Murdoch chairman and chief executive of News Corporation and executive co-chairman of 21st Century Fox.

There are also concerns about the links between Fox and Sky. James Murdoch is chief executive of 21st Century Fox and chairman of Sky. Chase Carey, one of Rupert Murdoch’s most trusted lieutenants, is vice-chairman of Fox and a non-executive director of Sky. IS THERE A REVOLT? SOME investors are not happy. Thomas Moore, investment director at Standard Life Investments which has a 0.26pc stake, said the role of James Murdoch in the two companies means ‘this can’t be an arms-length deal’.

He added: ‘There’s heavy representation of people aligned with Rupert Murdoch.’

Sky has set up an independent committee of the board to consider the terms of the bid.

It excludes James Murdoch and Carey and is headed by Martin Gilbert, the chief executive of Aberdeen Asset Management and senior independent non-executive on the board of Sky.

Gilbert’s committee of eight includes chief executive Jeremy Darroch, who took over from James Murdoch in 2007, and finance director Andrew Griffith.

The pair stand to share a £38m pay day if the deal goes through thanks to shares they have rights to under long- term bonus awards.

The rest of the committee is made up of non- executive directors including Inmarsat chairman Andrew Sukawaty, Standard Chartered banker Tracy Clarke and Lazard’s mergers and acquisitions chief Matthieu Pigasse.

Non- executive directors Katrin Wehr-Seiter and Adine Grate are also on the panel.

But Piers Hillier, chief investment officer at Royal London Asset Management which has a 0.37pc holding, said although setting up the independent board ‘addresses some of the conflicts of interest it doesn’t go far enough’ given James Murdoch’s role as chairman of Sky. IS THE PRICE FAIR? ALTHOUGH the bid of £10.75 represents a 40pc premium to the closing price of 769p on December 6, the day before the offer was made, Sky shares were trading at £10.75 as recently as February and were worth £11.40 in summer 2015.

It is thought that Fox is looking to take advantage of the fall in the pound and the fall in Sky’s share price since the Brexit vote.

Media analyst Claire Enders said the price represents ‘the bargain of a lifetime’ while Standard Life’s Moore said: ‘We would hope this is a starting bid and on reflection they will appreciate that a higher bid is more appropriate.’ WHAT’S NEXT? SKY shares closed down 2.8pc, or 28p at 972p last night – well below the £10.75 price proposed by Fox in a sign that investors are not convinced the deal will go through.

City experts warned that a higher bid was unlikely. Crispin Odey, who owns a 1.12pc stake in Sky through Odey Asset Management, said: ‘It would be very nice to get them to bid it up but I don’t think they will pay more than that.’

Liberum media analyst Ian Whittaker added last night: ‘I can’t see Fox coming back with a substantially higher bid.’ The proposed deal has now attracted the attention of MPs and could be referred to Ofcom, the industry regulator.

Shadow culture minister Kevin Brennan warned that the £18.5bn deal could concentrate too much media power in the hands of the few.

The European Commission is also likely to investigate the bid given Sky’s ownership of Sky Deutschland and Sky Italia.