U.K. Approves Fox's Sky Bid, Subject to Sale of Sky News, and Clears Comcast Offer
Culture secretary Matt Hancock's decision set up a potential bidding war between the media conglomerates for the European pay TV giant.
U.K. culture secretary Matt Hancock on Tuesday cleared 21st Century Fox's bid for full ownership of European pay TV giant Sky under the condition of a sale of the Sky News network to Walt Disney or another party, a divestment for which full details still need to be hashed out.
He also confirmed that Comcast's offer for Sky will not require a regulatory review in Britain. "I have concluded that the proposed merger does not raise public interest concerns, and so I can confirm today that I will not be issuing an intervention notice," he told the British parliament in London.
Hancock's decisions set up a potential bidding war for Sky. Fox's current offer valued Sky at around £18.5 billion, or $24.7 billion, as of Tuesday, while Comcast's bid valued it at £22.0 billion, or $29.4 billion. Analysts have predicted Fox, with the support of Disney, would raise its offer for Sky if its deal gets regulatory approval.
Hancock sad he agreed with Britain's Competition and Markets Authority (CMA) that "divesting Sky News to Disney, as proposed by Fox, or to an alternative suitable buyer, with an agreement to ensure it is funded for at least 10 years, is likely to be the most proportionate and effective remedy for the public interest concerns that have been identified."
He added that a CMA report to his department set out some draft terms for such a divestment, "and Fox has written to me to offer undertakings on effectively the same terms," including "significant commitments" from Fox. But he added that "some important issues" remain, "which still need to be addressed." Concluded Hancock: "I need to be confident that the final undertakings ensure that Sky News remains financially viable over the long-term; is able to operate as a major U.K.-based news provider; and is able to take its editorial decisions independently, free from any potential outside influence."
Once terms of a Sky News sale are reached, which the culture secretary said he hopes will happen within two weeks, parties will have 15 days, during which the culture department must hear input on it. Hancock said he hopes the overall process will be wrapped up within about a month.
Fox in late 2016 agreed to buy the 61 percent of Sky that it does not already own, but the deal has been held up by an extended regulatory review amid debate about whether it would give the Murdochs too much influence in Britain. At the start of May, the CMA said it had submitted its final report on Fox's proposed deal for Sky to Hancock, who had until June 13 to make a final decision.
Sky's independent board committee last month withdrew its support of the Fox deal after Comcast made a higher offer official. It didn't express support for one of the current bids over the other after Tuesday's decision, saying it "welcomes" the culture secretary's announcement. "The independent directors of Sky are mindful of their fiduciary duties and remain focused on maximizing value for Sky shareholders," the company said. "A further announcement will be made as and when appropriate."
Fox said in a response: "We note that the secretary of state agrees with this solution [of a sale of Sky News] and has instructed officials from the Department for Culture, Media and Sport (DCMS) to agree on final undertakings that he would be prepared to accept and consult on within the two-week time frame. We now look forward to engaging with DCMS, and we are confident that we will reach a final decision clearing our transaction."
Fox previously offered to legally separate and ringfence Sky News to seal its deal for Sky, or sell Sky News to Walt Disney, which in December struck a deal to buy large parts of Fox, including its Sky stake, for $52.4 billion.
The CMA in its preliminary report in January had raised concerns about the influence of the Murdoch family trust, which controls Fox and News Corp, over the U.K. media landscape. The regulator said then that while it had concerns on such so-called "media plurality" grounds, it did not have concerns in the second area its review focused on, the combined company's commitment to Britain's broadcasting standards. The CMA's preliminary report had suggested the government would have to decide whether to block the deal, order a spin-off or divestiture of Sky News, or set behavioral remedies to "insulate" it from the influence of the Murdoch trust.
A DCMS representative later in the day said in Britain's House of Lords in response to a question about where Tuesday's developments left the Comcast and Fox bids relative to one another: "This decision leaves them commercially on a level playing field so far as their respective bids are concerned."
What's next in the battle for Sky? "I expect Fox to eventually raise its bid and seek to obtain agreement for it from the Sky board," said Enders Analysis founder and analyst Claire Enders. "Comcast, however, has a considerable advantage should Fox fail to quickly sort things out: final government approval is dependent on the actual sale having been affected to Disney or another company. The shareholders will wish to see another bid."
She added: "In five to six weeks’ time we expect Fox to table another bid. Whether Comcast follows suit after may well depend on whether it has made concrete its intentions toward a bid for Fox. If it believes it will succeed in buying Fox, there is no point in having a price shootout with the company."