Fox Faces Race to Win U.K. Nod for Sky Bid as Disney Deal Looms

(Bloomberg) -- For the better part of a decade, Rupert Murdoch has tried to buy pay-TV broadcaster Sky Plc. Now it’s down to a few crucial weeks if he wants to have any hope of succeeding.

As Walt Disney Co.’s own plan to purchase the bulk of Murdoch’s 21st Century Fox Inc. looms in the background, the U.K.’s merger watchdog is set to issue provisional findings this week on whether the Sky takeover would give Murdoch too much influence in the U.K. and if Fox upholds broadcasting standards. With a final deadline scheduled for the start of March, Murdoch has little time to address any concerns.

“The timetable is fairly tight,” said Matthew O’Regan, a competition law expert at St. John’s Chambers in Bristol, western England. “They would have a short period, a matter of weeks, to respond to those provisional findings if any remedies are required, before a final decision is taken.”

The main hurdle Fox is likely to encounter is the question of Murdoch’s sway over British media and politics. His ownership of three U.K. newspapers -- the Times, the Sunday Times and the Sun -- could lead the U.K.’s Competition and Markets Authority to ask that Sky News, the fourth-most-used news source in the U.K., be shielded to preserve its editorial independence, as recommended by communications watchdog Ofcom in an earlier review.

Sexual Harassment

The CMA will also report its findings on whether Fox’s handling of sexual harassment complaints in the U.S. indicate problems with corporate governance, and how, if at all, those issues relate to its commitment to upholding broadcasting standards. Ofcom cleared Fox on those grounds last year.

While the CMA hasn’t given Fox more time for its response to the provisional findings, the authority could push back its final report by as many as eight weeks if it needs more time to review.

In a twist, a year after announcing its takeover bid for Sky, Fox then included the satellite pay-TV broadcaster in its deal last month to sell assets to Disney. The CMA says the Disney deal won’t affect its current inquiry because it won’t complete until late 2018, well after when it must deliver its recommendations to Culture Secretary Matt Hancock, who has the final say on whether to clear the Sky takeover.

A CMA spokeswoman said the only way it would end its investigation would be if Fox formally dropped its bid. Representatives from Sky and Fox declined to comment in advance of the CMA’s findings.

Phone Hacking

Separate to the CMA process, a trial over civil claims by people whose phones were hacked by reporters for Murdoch’s News Corp. starts in London this week. The claimants allege unlawful email deletion and destruction of evidence at a time when James Murdoch, Fox’s current CEO, was executive chairman of the U.K. publishing unit. 

Regulators watching the Fox-Sky deal have said they will consider any new evidence that comes out of the litigation. In 2015, after years of investigation, U.K. prosecutors said there was no evidence of email deletion to pervert the course of justice at Murdoch’s newspapers.

Opponents of the Fox-Sky tie-up had argued that the takeover would give Murdoch excessive influence over British media and politics. With Disney waiting in the wings, that argument has less force. And the prospect of Disney ultimately owning Sky may give the government more political cover to wave the Fox takeover through, said Martin Gilbert, Sky’s deputy chairman.

Political Heat

“The Disney bid for Fox has probably taken a lot of the political heat out of the bid for Sky,” Gilbert said in an interview on Bloomberg TV.

The CMA has held extensive hearings as part of its six-month review, including with directors from Sky and Fox, media experts and former employees at Fox News. A key focus has been on whether Murdoch would seek to influence Sky News.

At the time of Ofcom’s initial review, Fox offered to create an independent editorial board for Sky News to address any such issues. Ofcom said the proposal helped, but former Culture Secretary Karen Bradley said it did not fully remedy her concerns.

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