DIS Walt Disney Co

THE NEWS: 21st Century Fox on Tuesday said it could sell Sky PLC's news channel to Walt Disney to ease regulatory concerns over Fox's takeover of Europe's largest pay-TV operator.

THE MARKET REACTION: Shares in Sky rose on the back of the news. Sky shares at 1342 GMT were up 2.1% at 1,324.50 pence, while the FTSE 100--in which Sky shares are listed--was up 0.04%.

THE BACKGROUND: Fox currently owns 39% of Sky PLC, and in December 2016 launched a 11.7 billion-pound ($16.4 billion) bid to acquire full ownership of the British broadcaster, after a failed attempt at the beginning of the decade.

On Jan. 23, 2018 the U.K.'s Competition and Markets Authority provisionally ruled the acquisition against the public interest, citing media plurality concerns. Fox then pledged to take steps to ensure the independence of Sky News.

Separately, Comcast on Feb. 27 said it was considering a GBP22.1 billion offer for Sky PLC, topping the existing one by Fox, and that it hoped to start talks with Sky.

Sky said that no firm offer had been made and advised shareholders to take no action. No further announcements have been made since.

THE RATIONALE: Fox's plan should be enough to overcome British antitrust authorities' objections over its bid to acquire the 61% of Sky it doesn't already own, analysts at investment bank Liberum said.

A sale or legal separation were among the remedies suggested by the U.K. antitrust regulator in January. Another option was to allow Fox to create a board of mostly independent members to oversee Sky News.

Fox said Tuesday that an alternative to selling Sky News to Disney would be implementing a complete legal separation of Sky News from the rest of Sky, with guaranteed funding and operational independence for 15 years, but is still keeping all options open.

This, in turn, would pave the way for Disney's separate $52 billion bid to buy most of Fox, AJ Bell investment director Russ Mould said.

WHAT'S NEXT: The CMA will make its final recommendation in May, and the British government will then have the last word on the deal.

However, analysts at Liberum forecast that Fox, and Disney by implication, could raise its offer for Sky to match Comcast's proposal.

READ MORE ON WSJ.com (paywall content):

April 3: Fox Says Disney Could Buy U.K.'s Sky News https://on.wsj.com/2q0Vkhg

Feb. 12: Fox Offers to Insulate Sky News to Mollify British Regulators https://on.wsj.com/2Gvug43

Jan. 23: U.K. Raises New Hurdle in Fox-Sky Deal, But Keeps Door Open https://on.wsj.com/2GxYYcw

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(END) Dow Jones Newswires

April 03, 2018 10:01 ET (14:01 GMT)

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