The British government gave the green light Tuesday to 21st Century Fox’s bid to take over Sky, on condition that Sky News be offloaded to a third party such as Disney. The government also cleared a rival bid for Sky from Comcast, paving the way for the two U.S. media giants to battle it out for Europe’s biggest pay-TV company.
After months of scrutiny of Fox’s bid by media regulator Ofcom and the Competition and Markets Authority (CMA), British culture secretary Matt Hancock told Parliament that, if Fox agreed to divest the Sky News channel in an acceptable manner, its $15-billion offer for the chunk of Sky it doesn’t already own could proceed. Otherwise, Hancock said he would block the deal.
“I agree with the CMA that divesting Sky News to Disney, as proposed by Fox, or to an alternative suitable buyer, with an agreement to ensure it is funded for at least 10 years, is likely to be the most proportionate and effective remedy for the public-interest concerns that have been identified,” Hancock said.
He added that Fox had already assented in writing to the CMA’s previously suggested terms for shedding Sky News. Hancock said he required assurances that the respected news outlet would remain financially viable over the long term and that it would be free from outside influence.
Fox said the process of divesting Sky News was underway. “21CF has already submitted proposed undertakings to achieve the divestiture of Sky News to Disney,” the company said in a statement. Hancock said the next stage of the Fox-Sky process should be wrapped up within a month, following a short consultation period.
The announcement in the House of Commons was a relief for Fox, which has wanted to take over Sky for years and which lodged its latest bid 18 months ago. For Comcast, Hancock’s decision spares it the kind of in-depth official scrutiny that Fox, its leadership and its offer have all had to undergo.
Fox already owns 39% of European pay-TV giant Sky. Its attempt to buy the remaining 61% was approved by European authorities but stalled in the U.K. in the face of fierce opposition from campaigners and politicians. The CMA said earlier this year that the Fox deal would concentrate too much media power in the hands of the Murdoch family and was not in the public interest. Ofcom expressed similar concerns, but said separately there were not concerns over the Murdochs as fit and proper owners.
To get the deal over the line, Fox had committed to continue funding Sky News and offered various concessions relating to the loss-making newschannel, including guarantees of its editorial independence. It is now prepared to offload the news channel entirely.
Opponents have vowed to continue fighting a takeover by Fox, including pushing for a judicial review of Ofcom’s earlier assessment of the bid, which they say is flawed.
Tom Watson, an opposition lawmaker and a vocal opponent of the Fox-Sky deal, said the government needed to remain vigilant. “A bidding war is on the horizon,” he said. “That might be good for shareholders, but it’s the minister’s duty to protect the interest of the public. Sky is a gem of British broadcasting, respected worldwide. Its future and global reputation for excellence is at stake in this process. So it is right that if there is any doubt about whether the proposed solution is workable, then it is the duty of the Secretary of State [Hancock] to ensure that this merger is blocked.”
Comcast has offered Sky shareholders a richer proposal, a $31 billion deal for all of the company. Comcast has offered Sky stock holders £12.50 a share versus the £10.75 per share from Fox. Sky withdrew its recommendation to shareholders to accept Fox’s bid after Comcast weighed in. Following Hancock’s announcement Tuesday, Sky said in a statement that “the independent directors of Sky are mindful of their fiduciary duties and remain focused on maximizing value for Sky shareholders.”
Comcast has also offered safeguards and concessions regarding Sky News similar to those proposed by Fox. Hancock said he decided not to call for further review of Comcast’s offer because he had concluded that the proposed merger does not pose public interest concerns.
An already complex situation is made more complicated by Disney’s move for Fox assets, including Fox’s stake in Sky. Fox shareholders are scheduled to meet on July 10 to vote on the $52.4 billion agreement. Comcast has given notice that it will make a counteroffer for the Fox assets.
Comcast has also said that it would accept control of Sky without full ownership.