Rupert Murdoch’s 21st Century Fox has formally notified European Union authorities of its 11.7 billion pounds ($14.4 billion) bid for the remaining 61 percent of European pay TV giant Sky, which it doesn’t yet own, kicking off the regulatory review process.
Under EU rules, the European Commission now has about a month to decide if the deal would “significantly” reduce competition. Analysts have highlighted that the EU would have allowed News Corp., which later split into News Corp and Fox, to take full control of Sky in 2011. But the company back then pulled its offer amid the phone-hacking scandal.
The EU filing also kicks off the regulatory process in the U.K., where culture secretary Karen Bradley will have 10 working days to decide whether Fox’s bid for Sky should be subject to a public interest test, focused on the deal’s effect on media plurality, by communications regulator Ofcom. That possible review is expected to look at Murdoch’s control, via News Corp, of such British newspapers as The Times and The Sun.
Analysts are generally expecting a U.K. review, and Bradley on Friday said she was “minded” to recommend a review. “I have, today, written to the parties to inform them that I am ‘minded to’ issue a European Intervention Notice on the basis that I have concerns that there may be public interest considerations … that are relevant to this proposed merger that warrant further investigation. To be clear — I have not taken a final decision on intervention at this stage.”
On the basis of preparatory work, she said: “This is not an announcement of my final decision in relation to intervention, but an indication of what I am presently minded to do.”
She added: “The first public interest ground on which I am minded to intervene is media plurality. That is, specifically, the need for there to be a sufficient plurality of persons with control of the media enterprises serving audiences in the U.K. The second public interest ground on which I am minded to intervene, is commitment to broadcasting standards. This ground relates to the need for persons carrying on media enterprises, and for those with control of such enterprises, to have a genuine commitment to attaining broadcasting standards objectives.”
If Ofcom reviews the deal, it would report back on the public interest test within 40 days. If it has no concerns, Bradley would approve the bid. If Ofcom raises concerns, she would have to decide if the government can accept an “undertaking” from Fox to address the concerns. In 2011, for example, the company suggested spinning off Sky news channel Sky News before the bid was abandoned.
“As we have previously indicated, we anticipate regulators will undertake a thorough review of the transaction, and we look forward to engaging with them as appropriate,” Fox said. “We believe the combination of 21st Century Fox and Sky will create a company best suited to compete in a rapidly evolving industry, and are confident that the transaction will be approved based on a compelling fact set.”
Fox, which currently owns a stake of around 39.1 percent in Sky, which operates in the U.K., Ireland, Italy, Germany and Austria, has said it expects the deal to close before the end of 2017. It finalized its offer for Sky in December.
Fox CEO James Murdoch has said he does not expect that “meaningful concessions” will be needed to get approval for the deal. In a conference appearance in London on Thursday, he said Fox’s takeover of Sky would be good news for the U.K. creative industries.
Meanwhile, in a recent submission to Bradley, the Media Reform Coalition and online activist network Avaaz called on her to reject Fox’s Sky bid on competition grounds.
media assets that, like Sky, are cheaper in U.S. dollar terms due to the decline of the pound,” says one analyst in a report titled “ITV – The Next Bid Target?””]
