Sky Bids Make U.K. Dealmaker Gilbert Broker to Billionaires
(Bloomberg) -- On Tuesday morning just before the daily flurry of U.K. stock-market statements at 7 a.m., Martin Gilbert took a surprise phone call.
On the other end was Comcast Corp. Chief Executive Officer Brian Roberts, who informed Gilbert of his intention to make a 22.1 billion pound ($30 billion) bid for Sky Plc, the U.K. broadcaster where Gilbert leads independent directors. Minutes later, the offer was out, topping an existing bid by Rupert Murdoch’s 21st Century Fox Inc. for the 61 percent it didn’t already own of Sky.
Now Gilbert, the co-CEO of fund manager Standard Life Aberdeen Plc and a consummate dealmaker, finds himself in the unlikely situation of being the broker for Sky shareholders with two billionaire media families.
The unexpected twist hands Gilbert a chance to redeem himself with investors who’ve criticized his quick endorsement of Fox’s offer for Sky and called for a higher price. It also puts him in the awkward situation of potentially coming into conflict with long-time associates, the Murdochs.
“The independent directors have not really covered themselves in glory,” said Crispin Odey, Murdoch’s former son-in-law and founder of hedge fund Odey Asset Management, which owns a 0.8 percent stake in Sky and has been pushing for a higher offer. “They’ve been incredibly quiet.”
A spokesman for Gilbert at Standard Life Aberdeen declined to comment.
The Fox offer that Gilbert backed on the day it was announced in December 2016 was at a 42 percent premium to Sky shares at the time, which were hovering near a four-year low. Investors were fretting about the outlook for Sky’s TV business, with top-flight soccer viewing down and the Brexit vote weighing on the U.K.’s economic outlook. No other bidders emerged.
That all changed a year later, with Murdoch clinching a $52.4 billion deal to sell most of Fox’s media assets to Walt Disney Co., which would inherit the Sky takeover. Comcast’s interest this week puts Sky at the center of a global race for scale among media giants, with Comcast and Disney CEOs both calling the pay-TV company a “jewel,” and sets up a potential bidding war.
Sky’s shares began a steep ascent when the market opened just an hour after Gilbert’s Tuesday call with Roberts, gaining 21 percent on the day -- well above Comcast’s offer of 12.50 pounds a share. The brief, polite conversation lasted about five minutes, according to a person familiar with the matter, who asked not to be identified as the discussion was private. Shortly after, Roberts told reporters he would be seeking to meet with Sky directors not affiliated with Murdoch.
Gilbert’s experience positions him to extract the highest price, being versed in the finer points of special situations and with a reputation as a skilled and tough negotiator. The 62-year-old has notched more than 40 deals to grow a little Scottish investment trust into one of Europe’s biggest fund managers, culminating in a $3.67 billion merger last year with Standard Life Plc.
The financial services grandee has had to attend to other complex files, lately. He suffered a blow in mid-February at Standard Life Aberdeen, as Lloyds Banking Group decided to pull 109 billion pounds of assets, leading to the potential loss of almost 20 percent of funds at the asset management group. Last week, Gilbert’s firm sold its insurance unit to Phoenix Group Holdings for 3.2 billion pounds, taking an almost 20 percent stake in the closed-life fund consolidator.
At Sky, a case has been steadily building for Gilbert and the other independent directors to push Fox for a better offer, even before Comcast got involved. Premier League soccer viewing has rebounded this season and Sky came out a big winner in the league’s auction earlier in February for three more years of broadcast rights, paying less per game. The auction result added 5 billion pounds to Sky’s valuation, according to an estimate from Claire Enders of Enders Analysis.
Hedge funds have also been piling into Sky, including Elliott Management Corp., which is notorious for successfully agitating for higher payouts in takeovers. And the structure of Fox’s bid gives a small number of minority shareholders the power to block it.
Gilbert has been a director at Sky, a company founded by Rupert Murdoch where his son James is the chairman, since 2011. He has previously referred to meeting a “royal flush” when he sees the most influential Murdochs -- Rupert and sons James and Lachlan -- referring to the unbeatable poker hand, according to a person familiar with the matter.
Fox has so far stuck with its existing offer in the face of Comcast’s challenge, while Sky’s independent directors noted Comcast’s interest in a statement, advising shareholders not to take any action given no firm offer has been made. Should Comcast press ahead with a formal bid, that could obligate Gilbert to go back to the Murdochs, forcing a tough conversation.
By Wednesday, Comcast’s team was on its way back home, leaving a snowy U.K. and a much healthier Sky share price behind. They left fully intent on getting board approval for a formal offer in due course, said a person familiar with the company’s plans.
“The directors will have a simple job to recommend to the minority shareholders the bid that offers the highest price,” Enders said.
©2018 Bloomberg L.P.