21st Century Fox in Talks to Buy U.K.'s Sky -- Update
December 09 2016 - 1:21PM
Dow Jones News
By Austen Hufford
21st Century Fox Inc. is in late-stage discussions to buy the
rest of Sky PLC, the U.K.'s market-leading pay-TV provider, as Fox
again tries to consolidate its holdings years after its previous
attempt was thwarted by a phone-hacking scandal. Fox already owns
39.1% of the company.
The companies said Friday that they had reached a preliminary
agreement for GBP10.75 per share in cash ($13.52) but that certain
material offer terms remained under discussion. The $14 billion
offer was a 40% premium to Sky's Dec. 6 closing price. Its shares
were recently up 27%.
If completed, the deal would value all of Sky at about $23
billion. Fox has until Jan. 6 to say whether it will make a firm
offer.
In 2011, News Corp. dropped its bid to take full control of Sky
after a scandal over the reporting tactics at one of its U.K.
newspaper titles raised government and public outcry over the
deal.
News Corp. has since split into 21st Century Fox and News Corp,
parent company of The Wall Street Journal. Both News Corp and Fox
remain largely controlled by Rupert Murdoch and his family.
Recently, the Murdoch family has shown renewed interest in Sky.
In January, James Murdoch was appointed as Sky chairman, four years
after he had stepped down from the role. He is also the chief
executive of 21st Century Fox.
Fox said Friday that its minority holding is "not a natural end
position."
Fox's move Friday was driven in part by the opportunity to lower
its funding costs by taking advantage of the recent slide in the
British pound against the U.S. dollar, according to a person
familiar with the approach. The U.K. currency is down 16% against
the dollar since Britons voted in June to exit from the European
Union, amid concerns of slowdown in domestic economic growth.
The deal would combine Fox's content business with Sky's
direct-to-consumer access in Europe. Sky is a paid-television and
internet-service provider. It also creates and licenses television
shows and has sports and news arms. It licenses shows from both HBO
and Showtime for its European customers.
The company was created in 1990 when Rupert Murdoch's
then-year-old Sky Television merged with British Satellite
Broadcasting to create the U.K.'s biggest digital-subscription
pay-TV provider. It was known as British Sky Broadcasting, or
BSkyB, until 2015, when it changed its name to simply Sky to
reflect its growing European footprint.
Sky initially distinguished itself through its news service,
which offered a commercial competitor to the publicly funded
British Broadcasting Corp, and sports broadcasts, airing the
popular English Premier League's soccer games. In the late 1990s,
the broadcaster started focusing on producing and commissioning
more in-house TV shows.
After 21st Century Fox predecessor News Corp. dropped its bid
for Sky in 2011, Chase Carey, News Corp.'s chief operating officer
said in a statement at the time that while News Corp. believed the
proposed acquisition would have benefited both companies, "it has
become clear that it is too difficult to progress in this
climate."
Since then, Sky has expanded in Europe, buying its sister
companies in Germany and Italy from Fox in a deal worth about $9
billion and creating a pan-European pay-TV giant with 21.8 million
customers across Germany, Italy, Austria, the U.K. and Ireland.
Analysts speculated that Fox would try another takeover once the
political climate settled and the stock price was low. At the end
of trading on Thursday, the day before Fox announced its new bid,
Sky shares had fallen about 27% from a year earlier.
Sky CEO Jeremy Darroch, who has held the post since 2007, said
at a Morgan Stanley conference last month that the company would
focus on growing in Germany and Italy while expanding its U.K.
offerings. Mr. Darroch said Sky would launch a mobile service and
continue to produce original television content.
In the U.K., Sky has faced increased competition in sports
broadcasting from BT Group PLC, which in 2015 was the surprise
winner of a three-year, GBP900 million contract to televise UEFA
Champions League's soccer games. Concerns are mounting globally
over how much consumers are willing to pay for television and live
sports content. Analysts are also questioning the value of
increasingly expensive sports deals as a protection against
so-called cord-cutters, who drop their premium television
subscribers in favor of streaming services like Netflix Inc.
Mr. Darroch said that as rights to sports broadcasts have gotten
more expensive, Sky would have to make "harder choices about what
we invest in.
"We'll seek to win the most important things of course, but
we'll be happy or willing to let other things go," Mr. Darroch
said.
--Stu Woo, Shalini Ramachandran and Ben Dummett contributed to
this article.
Write to Austen Hufford at austen.hufford@wsj.com
(END) Dow Jones Newswires
December 09, 2016 13:06 ET (18:06 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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