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Challenge to U.K. Regulator’s OK of Potential Fox-Sky Takeover Dismissed

A U.K. court has dismissed a legal challenge to British media regulator Ofcom’s ruling that 21st Century Fox would be a fit and proper owner of Sky. It removes a potential hurdle for Fox’s attempted takeover of the European pay-TV giant just as Fox and new owner Disney mull whether to counter Comcast’s leading bid.

British activist group Avaaz, which has vociferously and consistently opposed the Fox bid, mounted the legal challenge, contending that Ofcom had not properly scrutinized the company’s attempt to buy the 61% of Sky it does not already own. But Justice Michael Supperstone disagreed, and dismissed Avaaz’s challenge last Friday. If he had found in Avaaz’s favor, Ofcom could have been forced to carry out parts of its evaluation of the takeover attempt again.

Fox’s bid has been beset by regulatory issues as British regulators and lawmakers weighed whether it passed muster. The bid was made in December 2016, and the matter landed on the desk of several successive culture ministers in the U.K. It was finally approved by the current minister, Jeremy Wright, earlier this month.

Fox and Disney shareholders last week approved the Mouse’s $71.3 billion deal to buy a raft of Fox assets, including 39% of Sky. Fox needs Disney approval to stay alive in the bidding war for Sky against Comcast, which has tabled the highest offer thus far, with a bid valuing the company at $34 billion. Fox-Disney has until Aug. 8 to make a new counteroffer.

Avaaz had succeeded in securing a judicial review of Ofcom’s actions, arguing in court that the threshold applied by Ofcom in evaluating the fit and proper ownership of Sky was too high. But Supperstone said the bar should be set high in such matters.

Arguments that Ofcom “adopted an irrational approach” to Fox when it came to its adherence to broadcasting rules, and that its assessment of Fox’s failings over allegations of sexual and racial harassment at Fox News was inadequate, were also dismissed. So was a claim that Ofcom failed to take earlier findings about James Murdoch’s conduct into account.

“We welcome the judgement, which found that Ofcom acted properly and fairly in carrying out all aspects of our ‘fit and proper’ assessment,” said a spokesman for the regulator.

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