Disney will have to make a full takeover bid for Sky even if the competition regulator quashes Rupert Murdoch’s £11.7bn attempt to buy 100% of Britain’s biggest pay-TV broadcaster, the UK takeover panel has ruled.
The owner of Walt Disney Studios has made a $66bn (£49bn) bid to take over 21st Century Fox, which owns a 39% stake in Sky. Meanwhile, it is awaiting the outcome of the UK competition regulator’s verdict on whether to allow Murdoch to buy the 61% of Sky he does not already own – a deal that was well in train before the Disney transaction.
If the Competition and Markets Authority clears Murdoch’s bid and Disney is in turn allowed to complete its Fox deal, then Sky will come under the full ownership of the theme parks-to-films conglomerate.
However, in December Disney turned its attention to an alternative scenario should Murdoch’s bid for Sky fail. It made a submission to the UK takeover panel, the city watchdog for corporate deals, saying it did not wish to be forced to pursue a full takeover of Sky if Rupert Murdoch failed to take full control.
Under rule 9.1 of the takeover code, companies are normally forced to make an offer if they buy a stake of 30% or more. Disney argued that owning Sky was not a major driver of its overall Fox deal – which includes buying Hollywood studio 20th Century Fox – and so that rule should not apply.
The takeover panel disagreed on Thursday. “The panel executive considers that securing control of Sky might reasonably be considered to be a significant purpose of Disney’s acquiring control of Fox,” it said. “Following the acquisition by Disney of Fox, Disney will be required to make a mandatory offer to the holders of ordinary shares in Sky.”
The takeover panel said that if Disney was required to make a separate offer to take control of Sky then it would be at £10.75 a share, the same price that Rupert Murdoch has tabled and has been accepted by Sky’s directors. Analysts believe that Sky is undervalued: it is trading at £13 a share and could be valued at up to £16 a share.
“At this stage, Sky shareholders are advised to take no further action,” Sky said in a statement on Thursday. “Further advice to Sky shareholders will be announced in due course.”
Earlier this month, Disney offered to buy Sky News to help Murdoch ease his deal past regulators investigating whether adding its ownership to his control of the Sun and Times will give him too much power over UK news media.
Disney’s move would at a stroke solve the media plurality issues that have dogged Murdoch and blocked deal approval.
A frustrated Fox has said it could easily get the deal through by shutting Sky News, a threat it would be unlikely to carry out because of the political fallout. Media regulator Ofcom has said the loss of Sky News could “present risks to plurality equal to or greater than those presented by the transaction itself”.
Instead, Fox has beefed up its pledge to make Sky News independent within the Sky operation. Fox has said it will fund Sky News for at least 15 years, up five years on its previous offer and 10 years more than its original proposal.
