The Sky TV bid is one to watch
For those who regard takeover bids as a spectator sport, News Corporation’s offer for British Sky Broadcasting Group (LON:BSY) should make good viewing. Not only is Rupert Murdoch bidding for a company chaired by his son, it threatens to embarrass the partners in the new coalition government.
News Corporation (NASDAQ:NWSA) owns 39 per cent of its satellite-broadcasting offshoot and has been mulling a bid for months, though playing down the prospects when asked – not least because chairman Rupert Murdoch lost his friends in the Labour government when his media empire backed the Tories. Now, just a month after the ConLib coalition takes power, out pops the £12bn bid.
And as a media bid, this is the exception to the Enterprise’s Act’s rule that ministers do not interfere with takeovers and leave them to the OFT or Competition Commission. This bid is thus political.
But while Murdoch might think the Conservatives owe him a favour, prime minister David Cameron should be unwilling to repay his supporters so blatantly. And while the Tories and Murdoch are mates, the Liberals still regard him as a dangerous force, and the business secretary, Vince Cable, is a Lib. It might thus be in both Cameron and Murdoch’s interest to leave Europe to decide this one – so long as it goes in News Corp’s favour.
The bid is further complicated by James Murdoch’s position however. He chairs BSkyB, having been its chief executive, but is a full-time executive with his father’s company. He will exclude himself from the Sky meetings but perhaps should absent himself from the bidder too?
Having floated Sky in 1994 News has rebuilt its stake to 39 per cent but now finds the snag in having an associate rather than a subsidiary. News does not receive 39 per cent of Sky’s profits or cashflow, just 39 per cent of the dividends. It thus has a lot of capital tied up in Sky for a low return. Nor is News allowed to exert any management control over Sky.
The choice is between selling the minority stake and putting the proceeds to better use or buying majority control (which means 100 per cent in practice) and raiding its cashflow and allying the companies’ products. News does not need 11 per cent acceptance to take its stake to 50 per cent to gain control, it needs support from half the 61 peer cent not currently owned – which means it needs 70 per cent acceptance to win (just as the mooted ‘Cadbury Law’ would require).
Undoubtedly there will be complaints about a Murdoch media monopoly in allying a UK television company with a newspaper group but in a multi-media world, it makes sense for the print group to have access to Sky’s 10m subscribers and its broadband base. That’ll be a hard decision for politicians to stomach however, and watchers of juicy takeovers will enjoy seeing ministers squirm.
