The Strategist

21st Century Fox offered $ 14.8 billion for Sky UK

12/15/2016 - 15:46

Transnational media holding, controlled by Murdoch family, offered £ 10.75 per Sky’s share to shareholders. Total price of the transaction may amount to £ 11.7 billion ($ 14.8 billion).

Media holding Twenty-First Century Fox Inc. (21st Century Fox) announced an agreement with management of the British Sky television. Under the deal, 21st Century Fox, which already owns 39.1% stake in the Sky, would to become the sole owner of the TV company, bought out minority shares.

21st Century Fox, founded by media mogul Rupert Murdoch, offers £ 10.75 for each share of Sky Company. This is about 40% higher than value of the securities at closure of trading on the London Stock Exchange on 6 December. Thus, total cost of Sky is estimated at approximately £ 18.5 Bln. Purchase of shares of minority shareholders may cost £ 11.7 billion, or $ 14.8 billion, to 21st Century Fox.

21st Century Fox plans to finance the deal at the expense of loans granted by Goldman Sachs, Deutsche Bank and JPMorgan Chase for total sum of £ 12,2 Bln.

Sky’s Independent Directors Committee unanimously recommended that shareholders accept the offer. However, according to Reuters, some shareholders appeared frustrated with the suggested price, considering it too low.

If the deal is approved by shareholders (at least 75% minority should speak in support of the transaction) and regulators, the transaction will be closed before the end of 2017.

Sky leads the European telecommunications, media and entertainment market. As of mid-2016, number of Sky’s customers in the UK, Italy, Germany, Austria and Ireland accounted for about 22 million people. Annual revenue amounted approximately to £ 12 billion, the company's budget for TV shows exceeds £ 5 billion.

Structures of Murdoch already own 39% of Sky. However, the corporation is not satisfied with this, and wants to take full control of the broadcaster. Following the transaction, the owner will get access to 22 million households in the UK, Ireland, Austria, Germany and Italy.

The agency considers the transaction to a category, which can be characterized by "content + distribution". For example, telecom giant AT&T announced acquisition of Time Warner for $ 85 billion. Similarly, Sky not only produces content, but also has an extensive distribution network in Europe.

Now is the perfect time to buy Sky, experts say. Weak pound, falling quotes and more compliant government willing to approve any investment in the UK economy together compose the perfect condition.

Murdoch’s News Corp. has already tried to buy out Sky in 2010. Then, a number of British politicians have expressed fears that owner of The Sun and The Times will obtain too much control over the national media. The deal eventually fell through because of scandal with eavesdropping on telephone conversations.

Reuters’ sources have already linked activity of Fox to Brexit. The decision to withdraw Britain from the European Union has brought down the national currency: the pound has fallen by 14% against the dollar. It’s not a big surprise that market value of Sky has declined as well.