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British Government Confirms It Will Refer Fox-Sky Takeover Bid for In-Depth Review

The British government confirmed Thursday that it would, as expected, send 21st Century Fox’s $15 billion takeover bid for Sky to the U.K.’s Competition and Markets Authority for a formal review.

The authority will take about six months to investigation whether Fox and the Murdoch family would wield too much power on the British media landscape as a result of the merger and whether they are “fit and proper” owners who would uphold local broadcasting standards. “It is important for public confidence that that full review take place by the CMA,” British Culture Secretary Karen Bradley said at a Royal Television Society conference in Cambridge, England, on Thursday afternoon.

The decision is a blow for Fox, which had counted on the deal closing by the end of the year. It now faces a delay that not only puts off its long-desired acquisition of European pay-TV giant Sky but also makes it liable to pay a hefty penalty to Sky shareholders for failing to meet the year-end deadline.

Bradley had announced in Parliament on Tuesday that she was “minded to” call in the Competition and Markets Authority to examine the takeover bid on both grounds of media plurality and adherence to broadcasting standards, saying she was not wholly satisfied by Fox’s assurances on the latter count. Previously, she had only been inclined to send the bid to the authority for scrutiny of plurality issues. But since that initial declaration in July, opponents of the deal ramped up their criticism of Fox’s corporate governance track record, particularly allegations of sexual and racial harassment at Fox News and the news channel’s allegedly biased reporting.

On Tuesday, Bradley gave Fox and Sky 10 days to submit more comments or declarations before issuing her final decision on sending the bid to the Competition and Markets Authority. She said Thursday that they had declined to do so.

“Yesterday I received letters on behalf of both parties to the merger confirming that while they disagree with my minded-to decision, they would not be making substantive representations in relation to it,” Bradley said in a statement Thursday morning. “As a result, I can confirm my final decision is to refer the merger to the CMA for a Phase 2 investigation on media plurality and genuine commitment to broadcasting standards grounds. I will issue and publish my formal referral decision in the coming days.”

At the conference in Cambridge, Bradley would not speculate on what the competition authority would decide. “Let’s let the CMA do its work,” she declared. “Let’s give them the six months to get on with the job.”

Fox said it had already written to Bradley “expressing disappointment that she had changed her mind” on the broadcasting standards question, against the advice of British regulator Ofcom, which had said it foresaw no problems on that score. “We now, therefore, look forward to engaging constructively with the CMA, as independent authority, and hope that the findings of this process will be respected” by Bradley, Fox said.

For its part, Sky said it would “continue to engage constructively in this process.”

Some analysts say Bradley’s decision does not seriously jeopardize Fox’s attempt to buy the 61% of Sky that it does not already own. While the in-depth review will delay closure of the deal, they say that the takeover is still likely to go through and that the Conservative-led British government, which is often accused of being too close to Murdoch, will have the political cover it needs to green-light the bid.

On Wednesday, Lachlan Murdoch, Fox’s executive chairman, called the Sky takeover his company’s “No. 1 priority.”

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