The U.K. government on Tuesday indicated it wouldn’t block a long-delayed deal by Rupert Murdoch’s 21st Century Fox Inc. to consolidate ownership of British pay-TV giant Sky PLC, but conditioned approval on working out details of a planned divestment of Sky’s news operations.
The decision by Britain’s culture secretary pushes back any final signoff on Mr. Murdoch’s bid for all of Sky and complicates a much bigger shakeup in the media industry. Cable giant Comcast Corp. is also bidding for Sky, and U.K. Culture Secretary Matt Hancock said Tuesday the government found no objection for that deal going through.
That technically gives Comcast a slight advantage in their competing bids for Sky. But Mr. Hancock said blocking a Fox-Sky deal was “not my preferred approach” and that he was “optimistic” that the government could reach an agreement with Fox. He laid out a timeline of 15 days to reach a deal.
Fox had previously said it was willing to sell off Sky News, a popular news broadcaster, to gain regulatory approval. The British government is now essentially taking Fox up on that offer, before giving the deal a final green light.
The decision prolongs further a much bigger corporate standoff playing out in the U.S.
Who Gets Sky?
Comcast, Disney and 21st Century Fox are all jostling for U.K. broadcaster Sky.
Dec. 9, 2016
Fox makes bid for 61% of Sky it doesn’t already own
Dec. 14, 2017
Walt Disney Co. agrees to buy 21st Century Fox assets, including 39% Sky stake
Jan. 23, 2018
British regulators say Fox ownership of all of Sky isn’t in public interest, but leave door open for remedial moves
Feb. 27, 2018
Comcast offers to buy all of Sky
April 3, 2018
Fox says Sky News
could be carved out from Sky or sold to Disney
to allay U.K. concerns
June 5, 2018
The U.K. government green lighted Comcast’s bid for Sky and said it will wait until it sees the details of Fox’s plan to divest Sky News before allowing its bid.
Source: staff reports
On one side is Fox, which already owns 39% of Sky. It launched a $16 billion bid for the remaining shares in December 2016, but British regulators have put it under extensive review. Mr. Murdoch then agreed in December to sell major Fox assets, including the Sky stake, to Walt Disney Co. for $52 billion.
On the other side is Comcast, which in February launched its own $30 billion for Sky, offering a sharply higher price and raising the possibility of a bidding war for the U.K. asset. Comcast is offering £12.50 ($16.64) a share, compared with Fox’s £10.75. Separately, Comcast said in May it was preparing a cash offer for the Fox assets that Disney agreed to buy in its all-stock offer.
In April, Disney said it was interested in buying Sky News to add to its portfolio of channels, whether or not it proceeds with its acquisition of Fox assets, including the 39% stake in Sky. The government said on Tuesday it would also consider letting Fox sell Sky News to a different buyer.
British regulators have been examining whether Fox’s full ownership of Sky would give Mr. Murdoch and his family too much influence in British media. Mr. Murdoch and his family are major shareholders in both Fox and News Corp, which publishes three major U.K. newspapers that would compete for news with Sky. News Corp also owns The Wall Street Journal.
In a statement, Fox said it “welcomes” the U.K. government’s decision and was “confident” it would reach an agreement by the two-week deadline.
Should Fox ultimately get the green light, investors—including American hedge fund Elliott Management Corp., which has built up a 3% stake in Sky—are expecting a bidding war. Sky shares have traded above both offers, changing hands early Tuesday afternoon in London at around £13.50. Sky shares were up modestly Tuesday, rising about 0.5% to £13. 56 after the U.K. announcement.
Fox, Disney and Comcast have each said their move on Sky was based on a desire to increase their international footprint. Operating in seven European countries, London-based Sky is a version of what some giant U.S. companies are trying to become: a vertically integrated company with telecommunications infrastructure as well as the programming that flows through those wires and airwaves. Sky is a telecom carrier that sells TV, internet and phone services, plus a media company that makes news, sports and entertainment programs.
Comcast faces a separate regulatory review from the European Union, which is expected to give its decision by June 15. Comcast Chief Executive Brian Roberts has said he sees a “clear path” to regulatory approval, in part because it currently has a tiny European presence.