Fox Makes It Easier to Clinch Sky in Takeover Fight With Comcast

(Bloomberg) -- 21st Century Fox Inc. is making it easier to clinch a takeover of European broadcaster Sky Plc by lowering the bar for approval, to gain an edge over rival bidder Comcast Corp.

Fox on Tuesday switched the conditions of shareholder acceptance for its bid to a straight offer, from a scheme of arrangement. That means Fox can use its existing holding in the British company to get to an approval threshold of as little as 50 percent of Sky shareholders, from 75 percent previously.

“This allows Fox to take advantage of their 39 percent stake,” said Bruno Burki, an analyst at United First Partners in London. “They only need 11 percent of the total register to succeed, whereas Comcast still needs 50 percent plus one share.”

Fox on Tuesday formalized its previously announced bid of 14 pounds a share for the rest of Sky, starting a 46-day clock during which Comcast and Fox can change their offers. Fox’s bid is still below Comcast’s 14.75 pound-a-share price.

Fox’s own shareholders approved a $71 billion takeover by Walt Disney Co. last month, setting the stage for a huge swath of media assets to change hands, including 20th Century Fox, a stake in Hulu and cable networks such as FX. Disney also would get Fox’s current stake in Sky -- and a shot at acquiring the rest of that business.

Sky acknowledged the publication of Fox’s offer and said it would publish its formal response within 14 days, as set out under U.K takeover rules.

Fox originally structured its bid for Sky as a scheme of arrangement back in December 2016 to make it easier to buy out any minority shareholders that refused to sell, provided 75 percent approved the plan. That higher bar for approval also helped Fox and Sky make the case that non-Fox shareholders would be getting a fair chance to turn down the bid.

With the competition fierce for Sky -- both sides have already raised their offers -- Fox is now switching tacks, as it looks to gain the upper hand over Comcast.

Lingering Questions

Investors are looking for signs of Fox and Disney’s strategy regarding Sky this week as executives comment alongside earnings. Fox is due to deliver its numbers on Wednesday, following Disney’s third-quarter results on Tuesday.

Disney Chief Executive Officer Bob Iger called Sky “the most successful pay-television company in Europe,” on a conference call Tuesday, and reiterated his resolve to own the company, after delivering third-quarter results that missed analysts’ estimates but left investors optimistic about the media giant’s video streaming plans.

“The addition of these valuable assets will greatly enhance our position as a global entertainment company with excellent production and distribution businesses in key and emerging markets around the world,” Iger said.

Click here for more on Disney’s video streaming plans

One question for investors will be whether Disney can justify its $71 billion offer for Fox without also owning all of Sky. Another concern: Can Disney launch its nascent streaming platform in Europe without the content that is available via Sky?

Analysts have speculated that Burbank, California-based Disney could agree to a deal with Comcast that might involve swapping portions of Hulu and Sky -- and potentially renegotiating distribution rights over Disney and Fox content with the British broadcaster.

If not, Sky shareholders may watch the bidding war continue from the sidelines, until the last moment. If there is still a deadlock after 46 days, the U.K. takeover authority can step in and start a formal auction.

“If you’re a shareholder, you’re waiting till day 46” to tender, said United First Partners’ Burki.

To contact the reporters on this story: Joe Mayes in London at jmayes9@bloomberg.net;Anousha Sakoui in Los Angeles at asakoui@bloomberg.net;Christopher Palmeri in Los Angeles at cpalmeri1@bloomberg.net

To contact the editors responsible for this story: Rebecca Penty at rpenty@bloomberg.net, ;Nick Turner at nturner7@bloomberg.net, Thomas Pfeiffer

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