DIS Walt Disney Co

By Stu Woo and Ben Dummett 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (February 15, 2018).

LONDON -- Sky PLC shares rose above the price that 21st Century Fox Inc. has offered for the British pay-TV giant for the first time since the bid -- putting pressure on Rupert Murdoch's Fox to sweeten the pot.

The rise was a response to Sky retaining rights to broadcast English Premier League soccer matches and could complicate the much larger $52 billion deal by Walt Disney Co. to buy a big chunk of Fox assets, including Sky.

Late Tuesday, Sky announced it won TV rights to the matches for three years starting in 2019 at a cost of GBP1.2 billion ($1.7 billion) a year, or 16% less per match than in the previous auction.

Sky shares rose as high as GBP11.01 on Wednesday before closing up nearly 2% at GBP10.82 in London trading. That exceeded the GBP10.75 per-share price Fox agreed to pay in December 2016 to buy the 61% of Sky it doesn't already own. The deal is currently worth about $16 billion.

Should Fox secure regulatory approval for the acquisition, it would need support from 75% of Sky shareholders, excluding Fox's stake, for the deal to go through. Fox could also try a more complicated process that requires a simple-majority approval. In either case, with the stock now trading higher Fox may be forced to raise its bid.

Some Sky shareholders, including hedge-fund manager Crispin Odey, said before the soccer rights auction that Fox should increase its offer. Mr. Odey didn't respond for requests for comment on Wednesday.

U.S. hedge fund Elliott Management Corp., which has about a 2% stake in Sky, declined to comment. Elliott is known for its activist campaigns and for getting involved in deals and holding them up to increase the price.

A Fox spokeswoman declined to comment.

If Fox raises its offer for Sky, it might need the approval of Disney to do so.

Disney in December struck a deal to buy the majority of Fox assets, including its current 39% stake in Sky, for $52 billion. If Fox successfully acquires 100% of Sky, then Disney would assume the debt that Fox took on to finance the deal.

A regulatory decision on the Disney-Fox deal isn't expected until months after regulators finish their Fox-Sky review.

Cable giant Comcast Corp. is also considering renewing its pursuit of Fox assets, including the Sky stake, The Wall Street Journal reported this week.

UBS estimated that the terms of the soccer-rights auction could boost Sky's earnings before interest, taxes and amortization to about GBP2.2 billion for fiscal year 2020. That compares with analysts' previous estimates of about GBP1.7 billion, and would give Sky investors more reason to seek a higher bid.

Before shareholders can vote on the Sky deal, Fox first needs to win approval from the U.K. government. Antitrust regulators reviewing the merger have said Fox's full ownership of Sky, which runs a popular news service, might give Mr. Murdoch and his family too much influence in British media.

The Murdoch family controls a 39% voting interest in both 21st Century Fox and News Corp, which publishes major British newspapers, including the Sun, the Times of London and the Sunday Times. News Corp also owns The Wall Street Journal.

To mollify regulators, Fox on Monday offered to create an independent board to oversee Sky's news operations. Regulators are scheduled to deliver final recommendations in May to the U.K. government, which can approve the deal, approve it with conditions or reject it.

Write to Stu Woo at Stu.Woo@wsj.com and Ben Dummett at ben.dummett@wsj.com

(END) Dow Jones Newswires

February 15, 2018 02:47 ET (07:47 GMT)

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