Sky Stock Gains Ahead of Fox Deal Decision, Discount Remains
The 9 percent gap to the bid means "there is some uncertainty priced in," and if the deal gets a more in-depth review, that is "likely to widen," says one analyst.
The stock of European pay TV giant Sky has risen in recent days, a potential sign that investors have become more confident that 21st Century Fox will get regulatory approval to take full control of the company, in which it already owns a 39 percent stake.
Sky shares again gained Monday as a deal between British Prime Minister Theresa May and a smaller party ensured her party a majority in Parliament, closing at 9.70 pounds, more than 9 percent below the 10.75 pound takeover offer from Fox. The June 8 election had weakened May's party and gave it a minority in Parliament, leading some analysts to argue that this posed more risks for Fox's Sky deal and its regulatory review.
U.K. Culture Secretary Karen Bradley is set to announce her initial decision on the deal by Thursday. She could wave it through, call for conditions or ask for a more in-depth regulatory review.
"Our view is that the chances of a referral of the deal to the Competition Markets Authority (CMA) for a lengthier investigation has increased given the current political circumstances," said Liberum Capital analyst Ian Whittaker in a Tuesday report. "The shares are trading at a circa 9 percent discount to the bid..., so there is some uncertainty priced in."
Reiterating his "hold" rating on Sky's stock, he added: "If the deal is referred to the CMA, this discount is likely to widen."
On Tuesday, the stock was down 0.3 percent in early trading.