Fox Boosts Sky Bid to $32.5B, Trumping Comcast Offer
Fox had in December 2016 offered to buy full control of Sky, in which it already owns a 39 percent stake, in a £10.75-per-share deal.
21st Century Fox, controlled by the Murdoch family, has increased its takeover offer for European pay TV giant Sky, trumping a recent competing Comcast bid that had come at a higher price than Fox's original offer.
The new offer, unveiled early in the London morning on Wednesday, values Sky overall at £24.5 billion, or £14 per share, or $32.5 billion. Fox, which in press releases refers to itself as 21CF, already owns a 39 percent stake in Sky.
Fox reached an agreement on the deal with the independent committee of Sky's board that has to review any possible deal. "The increased 21CF offer represents an increase of approximately 12 percent to the Comcast offer price," the company said.
And Sky said: "The increased 21CF offer represents a substantial increase in value relative to the Comcast offer and the original 21CF offer."
The deal still needs final clearance from the U.K. government, which has been expected this week following a decision to clear it if final conditions for a sale of Sky News are agreed, which was the case, followed by a public comment period, which ended last week. However, a reshuffle in the U.K. government early this week is seen as potentially causing a slight delay in final approval.
Fox had in December 2016 finalized a takeover agreement and offered to buy full control of Sky in a £10.75-per-share deal that valued Sky at roughly £18.5 billion, or $23.2 billion at the time. Fox owns a 39 percent stake in the pay TV company that operates in the U.K., Ireland, Germany, Austria and Italy and has been going through an extended regulatory review process in the U.K. that has been expected to be completed by mid-June.
Comcast in late February said it was planning a £22.0 billion ($31 billion) takeover offer for Sky, or £12.50 per share, a 16 percent premium to Fox's original bid, which it made official on April 25. Sky's independent board committee then withdrew its support for Fox's original offer before supporting Wednesday's new and sweetened offer.
Walt Disney, in a separate deal, is looking to buy big parts of Fox, including its Sky stake, for $71.3 billion. And it supports the higher Fox bid for Sky. "Disney has provided its consent to the increased indebtedness that would be incurred by 21CF as a result of the Increased 21CF offer," Fox said. "Also, in the event that the Disney transaction does not complete due to the failure to obtain regulatory approvals or in certain other limited circumstances, Disney has agreed to reimburse 21CF for an amount equal to the difference between the cash consideration (i.e. £14.00) and £13.00 for each Sky share purchased by 21CF pursuant to the increased 21CF offer (plus any interest and fees on such amount)."
The ball is now in Comcast's court, with chairman and CEO Brian Roberts and his team understood to be eyeing possibly higher bids for both Sky and Fox. Sky's Wednesday stock price of close to £15 following the sweetened Fox offer was widely seen as a sign by analysts that investors were expecting Comcast to increase its bid further.
One new provision in Fox's increased bid could help Fox seal shareholder approval of the deal more easily. Under the terms of the previous and new deal, Fox needs to win support from 75 percent of Sky’s non-Fox shareholders. But the new agreement also allows the companies to change the deal structure under U.K. law to one that would only require a simple majority of all shareholders in favor of the Fox deal.
Fox, led by executive co-chairs Rupert and Lachlan Murdoch and CEO James Murdoch, on Wednesday highlighted its long relationship with Sky. "As the founding shareholder of Sky, we have remained deeply committed to bringing these two organizations together to create a world-class business positioned to deliver the very best entertainment experiences well into the future," it said.
"We strongly believe that a combined 21CF and Sky will be a powerful driver for the continued growth and vibrancy of the U.K. and broader global creative industries," it added. "The enhanced scale and capabilities of the combination will enrich Sky’s ability to continue on its mission for years to come, especially at a time of dynamic change in our industry. This transformative transaction will position Sky so that it can continue to compete within an environment that now includes some of the largest companies in the world, but none of whom have demonstrated the same local depth of investment and commitment to the U.K. and to Europe."
Added Fox: "We said when we announced our proposed acquisition of Sky that we were firmly committed to U.K.’s creative industries and the contribution they make to the U.K. economy. We remain committed to the U.K. and believe that our offer for Sky will bring the best value for all the company’s stakeholders."