Disney-21st Century Fox Negotiations Add Uncertainty to Fox’s Sky Takeover Bid

Twenty-First Century Fox’s $15-billion bid to own all of Sky is already up in the air with Britain’s regulatory authorities. A potential sale of various Fox assets to Disney, which would likely include Fox’s 39% stake in Sky, adds another dollop of uncertainty to the takeover bid and to what lies ahead for the European pay-TV giant.

Fox’s proposed takeover of Sky is currently under scrutiny by Britain’s Competition and Markets Authority, or CMA, which is investigating whether the deal, if approved, would adversely impact media plurality in Britain. The deadline for submissions to the CMA is Friday, and the body is expected to announce its preliminary findings sometime during the week of Dec. 18, though the timetable could be extended because of the vast number of submissions received.

Analysts say that the CMA is likely to proceed with its investigation and make its findings even if, in the interim, Fox and Disney shake hands on a deal for the latter to buy Fox’s film and TV studios, the Hulu streaming hub and other media assets, including the 39% stake in Sky. CNBC reported that such an agreement could come as early as next week.

“They’ve done all the work,” analyst Mathew Horsman of London-based Mediatique said of the CMA. “I’m pretty sure they’re going to announce a decision.”

While British officials would probably continue their examination of a potential Fox-Sky takeover, whether the bid could or would actually continue under Disney is another question. Rupert Murdoch, who has long dreamed of fully owning Sky and has been the takeover bid’s biggest champion, would no longer hold the reins.

In some ways, Sky would be a valuable asset for Disney, as a potential content outlet and as Disney tries to take on Netflix and other streaming giants. Through Fox and Sky, Disney would have access to Hulu and to Sky’s OTT services, in addition to its own DisneyLife platform.

“I would’ve thought that Disney wouldn’t mind having control of Sky given their position around Netflix and DisneyLife and the next 10 years of distribution battles,” Horsman said.

That might not require full ownership of Sky, however. Murdoch was already able largely to call the shots at Sky through Fox’s 39% stake, and Disney could try to do the same.

In a recent note to investors, Liberum Capital said that the interest in Sky shown by potential Fox suitors such as Disney and Comcast, which is also said to be eying Fox, was a good sign for the European satellite broadcaster.

“The positive for Sky from all of this is that it shows the major U.S. groups are interested in the asset, demonstrating that many media groups still see the Sky asset as a very valuable one to own,” Liberum said. “One other point as well would be that both Comcast and Disney would have a fairly detailed view of the health of the Sky business given both supply channels to Sky. The fact they were/are both interested in the assets suggest[s] that the concerns expressed about Sky’s fundamentals may not be as great as is sometimes feared.”

One advantage for Disney — or Comcast, for that matter – if it chose to pursue 100% ownership of Sky is that such a deal would probably survive regulatory scrutiny in Britain fairly easily. The Fox-Sky takeover bid had already been cleared on competition grounds; the sticking point now is plurality on the news landscape, since the Murdoch family also owns British print media such as The Times of London and the Sun and would control Sky News if Fox took over Sky. That would no longer be an issue under a Disney umbrella.

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