Watchdog arbitrates between shareholders and Disney in Sky battle
We’ll send you a myFT Daily Digest email rounding up the latest Sky PLC news every morning.
The UK’s takeover watchdog has intervened to arbitrate between minority shareholders in Sky and its possible future owner Disney, setting the price the US media group will have to offer investors if rival bids for the pay-TV network collapse.
Disney must offer Sky shareholders at least £14 a share to buy the business if its wider deal to acquire the bulk of 21st Century Fox completes before competing takeover bids for Sky, the UK Takeover Panel has ruled.
The Takeover Panel’s intervention is the latest twist in a fiendishly complicated bidding frenzy over both Fox and Sky that has seen Disney been pitted against US rival Comcast in a fierce battle for assets that each believes is crucial to survive the digital disruption ravaging the media business.
Sky — already 39 per cent owned by Rupert Murdoch’s Fox, which has been trying to buy the rest since late 2016 — is the target at the centre of the battle. Earlier this week, Comcast trumped a raised bid by Fox for Sky, offering £14.75 to Fox’s £14 a share.
Disney will be forced to make the £14 a share offer for Sky only if neither the Comcast bid — which, assuming it is formally put to investors, needs 50 per cent plus 1 of Sky shares to approve it — nor the one from Fox complete before the bigger transaction does.
In those circumstances, Disney picks up the 39 per cent of Sky owned by Fox, but must offer the other 61 per cent of shareholders a price of at least £14 a share after the Takeover Panel confirmed a “chain principle” applies to the deal.
The Takeover Panel’s latest intervention followed significant pressure from Sky’s independent directors and a series of hedge funds who have piled into Sky shares with the aim of squeezing as much value as possible out of the deals in contention.
In April the watchdog intervened to require Disney to match the value of Fox’s bid for Sky, should Disney complete its Fox acquisition first. But that ruling was based on an earlier Disney-Fox deal, that valued the entertainment assets of Mr Murdoch’s company at just $52bn.
A new deal between Fox and Disney valued the assets at 35 per cent more, $71bn, and was designed to see off rival interest from Comcast. Investors had lobbied the Takeover Panel that the 35 per cent increase should also be applied to Disney’s potential bid for Sky. That would lift the mandatory offer price to more than £14.50 a share.
One analyst said: “Sky shareholders are disappointed about the Panel decision. They see it as a weak decision, and don’t see getting £14 price as protection from the Panel.”
Sky has requested a review of the decision.
The April ruling had already put the body in unprecedented territory and in an uncomfortable position of setting the minimum price for an asset in an auction. Customarily, the UK body plays a light-touch role and relies on its rule book to make sure all shareholders of a target company are treated fairly in a public battle.
Shares in Sky were trading at £15.40 by midday in London on Friday, reflecting investor expectations that the bidding war for the asset would continue.
This article has been amended to clarify the implications of the Takeover Panel’s ruling
Get alerts on Sky PLC when a new story is published