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Sky Withdraws Recommendation of Fox Takeover After Comcast Offer

Committee terminates co-operation agreement with 21st Century Fox

The committee formed to evaluate 21st Century Fox’s bid for European pay-TV operator Sky has withdrawn its recommendation of that offer after Comcast tabled a richer offer on Wednesday.

Comcast has made its $31 billion offer formal, offering a 16% premium to the Fox offer on the table. “As a result of the announcement of this higher cash offer, the Independent Committee is withdrawing its recommendation of the offer announced by 21CF on 15 December 2016 and is now terminating the Co-operation Agreement entered into with 21CF on the same date,” the Sky committee said soon after the Comcast offer was lodged.

In withdrawing its recommendation and killing the co-operation agreement, the committee added that Fox would no longer be on the hook for provisions including a weighty break fee that could have totaled £200 million ($278 million).

The committee is separate to the Sky board but includes CEO Jeremy Darroch and other senior executives. After Comcast lodged its offer, Fox, which already owns 39% of Sky, said it is committed to its bid and it is weighing its options.

The Sky committee noted its duty is to maximize value for shareholders. With that commitment in mind, and a better offer on the table, insiders said it had to remove its recommendation of the Fox offer and characterized that action as “housekeeping.”

Both offers are subject to regulatory approval. Fox has become bogged down and struggled to get its deal over the line. The U.K.’s Competition and Markets Authority is currently looking at the bid, which has already been scrutinized by media regulator Ofcom. Comcast will also need to get regulatory green lights, but will not face some of the issues that have beset the Fox bid, such as control of news outlets in the U.K.

“At this time, the Independent Committee notes that both offers are subject to pre-conditions and neither offer is currently capable of being put to shareholders,” Sky said.

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