Fox-Sky Probe: More Likely a Bump in the Road Than a Fatal Blow, Analysts Say

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The British government’s intention to seek a full review of 21st Century Fox’s bid for Sky is unlikely to derail the takeover, analysts say, even though opponents of the deal hailed the decision as a “golden opportunity” to sink the $15-billion agreement.

Fox, which has agitated for a speedy resolution to official scrutiny of the Sky deal, criticized U.K. culture minister Karen Bradley’s announcement Tuesday that she was inclined to refer the deal for examination by the Competition and Markets Authority, both on grounds of media plurality and on whether the Murdochs would adhere to British broadcasting standards. Bradley had previously said only an investigation into the former question was necessary.

Fox said in a terse statement that it does “not believe that there are grounds for the Secretary of State [Bradley] to change her previous position.” But it added that it expects the deal to close by the end of June 2018, thas long as there are no further delays.

Given that Bradley was going to send the deal to the competition authority for scrutiny on plurality grounds anyway, analysts say that the additional probe regarding broadcasting standards was more a bump in the road than a fatal blow. “Extra reasons have been added as to why it is being referred to the CMA, such as broadcasting standards and corporate governance, but from a practical standpoint it doesn’t hugely change things,” said Liberum Capital’s Ian Whittaker. “The end goal remains to take over Sky, and I don’t think this changes things significantly. If you read between the lines, I think it still seems the deal will pass.”

Market watchers said Bradley was keen to avert the legal action that had been threatened if the deal wasn’t sent for comprehensive review by the Competition and Markets Authority. But the fact that British regulator Ofcom has not raised objections to the takeover following more than one examination of the bid still put Fox in a good position.

“It was a surprise she changed her previous ‘minded to’ decision,” Alice Enders of London-based Enders Analysis said of Bradley’s announcement Tuesday in Parliament. “I think Fox is going to see this through. Ofcom is the regulator of record for broadcast standards, and it would be hard for the CMA to ignore its advice entirely. The tricky thing is corporate governance and where that fits in to the picture.”

Fox has 10 days to make further submissions to Bradley, but the minister is unlikely to change her mind yet again. Her volte face on having the CMA look at a combined Fox-Sky’s commitment to upholding broadcasting standards was criticized by Fox, which noted that her decision went against Ofcom’s guidance. “We are surprised that after independent regulatory scrutiny and advice, and over four months to examine the case, the Secretary of State is still unable to form an opinion,” Fox said. “We urge the Secretary of State to take a final decision quickly.”

Sky’s share price slumped, then partially recovered in the wake of the news, prompting one Sky News expert to speculate that investors are skeptical that the Fox deal will go through. In an official corporate statement, Sky joined Fox in highlighting the difference of opinion between Ofcom and Bradley.

“We are disappointed by this further delay and that the Secretary of State is now minded to refer the proposed acquisition to the CMA in relation to broadcasting standards despite Ofcom, as the independent broadcast regulator, maintaining its advice that there are not sufficient concerns to justify such a reference,” it said.

Fox News and its troubles over alleged sexual and racial harassment became central to the British government’s consideration of the Fox-Sky deal, and have been the subject of many complaints from opponents to the deal. Fox recently yanked the news network from the Sky platform, but as late as last week Fox confirmed to Variety that it still held the British license for the channel to operate, although it intended to surrender it. Ofcom, meanwhile, confirmed that it will continue to investigate open complaints against the channel in the U.K.

Activist group Media Matters mentioned Fox News in its response to Tuesday’s developments. “We urge Secretary Bradley, the CMA and all members of Parliament to continue to take serious the most recent developments at Fox News and 21C Fox that bring to light the Murdochs’ negligence in adhering to broadcasting standards and establishing strong compliance procedures and corporate governance systems,” said Angelo Carusone, the group’s president.

Other opponents of the deal lined up to laud Bradley’s announcement. “The new investigation into the Murdochs’ bid for Sky TV is a ‘golden opportunity’ to uncover new evidence against the Sky takeover,” said campaign group Avaaz, which had threatened Bradley with legal action.

Wigdor, which is pursuing several cases against Fox News, said: “We are pleased that after our submissions Secretary Bradley has concluded that a further investigation is necessary in order to determine whether Fox has met broadcasting standards and are hopeful that Fox will now waive any gag orders so that other individuals can provide relevant information without fear of reprisal.”

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