Fox takeover of Sky referred to regulators by Karen Bradley

(c) Sky News 2017: <a href="http://news.sky.com/story/fox-takeover-of-sky-referred-to-regulators-by-karen-bradley-10803499">Fox takeover of Sky referred to regulators by Karen Bradley</a>
 

Karen Bradley, the Secretary of State for Culture, Media and Sport has, as expected, referred the proposed takeover of Sky (Frankfurt: 893517 - news) by 21st Century Fox, the US entertainment giant, to the media regulator Ofcom.

The regulator now has 40 working days to decide whether the bid for Sky, the owner of Sky News, should go ahead.

It is due to report back to Ms Bradley by 16 May.

Ms Bradley had already told MPs (BSE: MPSLTD.BO - news) just under two weeks ago that she was "minded" to refer the deal to Ofcom on the grounds of media plurality and broadcasting standards.

Since then, she has received representations from 21st Century Fox.

Today she said: "While the representations from 21st Century Fox highlighted areas where it contested the position taken in my 'minded to' letter, none of the representations have led me to dismiss the concerns I have regarding the two public interest grounds I previously specified."

Fox, the world's fourth largest entertainment company and the maker of hit TV shows such as The Simpsons and Modern Family, already owns 39.1% of Sky.

Just before Christmas, it tabled a proposal to buy the remainder of Sky for £11.7bn, valuing the entire company at £18.5bn.

Since then, there have been calls for the deal to be referred to Ofcom, led by Ed Miliband, the former Labour leader and Sir Vince Cable, the former Business Secretary.

However, Ms Bradley rejected requests from Mr Miliband and the deputy Labour leader, Tom Watson, for Ofcom to also investigate a third area of public interest, under the Enterprise Act, on whether any new owner of Sky would be "fit and proper" to hold a broadcasting licence, pointing out that Ofcom had already said it would be looking into this.

She (Munich: SOQ.MU - news) rejected suggestions from Mr Watson that Ofcom would not have sufficient time to carry out such an investigation.

Responding to the announcement, 21st Century Fox said: "21st Century Fox looks forward to working with UK authorities in their reviews of our proposed transaction to combine with Sky.

"We are confident that a thorough review of our track record over 30 years will underscore our commitment to upholding high broadcast standards, and will demonstrate that the transaction will not result in there being insufficient plurality in the UK.

"The media market has changed dramatically in recent years, as has our business. We believe our proposed £11.7bn investment will benefit the UK's creative industries."

Shares (Berlin: DI6.BE - news) of Sky, which are valued at 1075p each under the proposed deal, were barely changed on the news - suggesting that investors had already "priced in" a regulatory investigation by Ofcom.

Should Ofcom raise concerns with the bid, Ms Bradley can then refer these back to 21st Century Fox and Sky and invite them to come up with remedies that might alleviate those concerns.

However even if Ofcom raise no concerns, there remains the possibility that Ms Bradley may refer it to the Competition and Markets Authority.

News Corporation (Frankfurt: A1W048 - news) , the media giant led by Rupert Murdoch, first sought to buy full control of Sky (Amsterdam: BK8.AS - news) - then called BSkyB - in June 2010 for £8bn.

That deal attracted much scrutiny because it would have brought Sky News into the same stable as News Corp's UK newspaper assets - The Sun, The News of the World, The Times and The Sunday Times.

It attracted criticism from other newspaper publishers about a concentration of media ownership and, in response to regulatory concerns, BSkyB agreed to hive off Sky News as a separate company.

But in July 2011, following revelations that the News of the World had hacked the mobile phone of murdered schoolgirl Milly Dowler, News Corporation dropped its offer.

News Corporation went on to demerge its film and television assets outside Australia into a new company, 21st Century Fox, leaving it as a focused publishing business.

Aside from its UK newspaper titles, its other assets include the Wall Street Journal, the New York Post, The Australian and the book published Harper Collins.

21st Century Fox, meanwhile, has no UK media assets other than its existing 39.1% stake in Sky.

Critics have argued, though, that because Mr Murdoch and his family own stakes in both 21st Century Fox and News Corporation, the plurality of media ownership could still be compromised by a takeover of Sky.

21st Century Fox has previously said it is confident "the facts will show that the UK media is robustly plural and that plurality has increased in recent years".

It pointed out that the internet and social media had transformed the way news is consumed and provided in the UK and added that, contrary to previous analysis published by the Department for Culture, Media and Sport, DMGT - the owner of the Daily Mail and Mail on Sunday - had overtaken News Corporation to become the UK's largest newspaper publisher.

The European Commission is separately carrying out its own investigation of the proposed takeover and is due to report back by 7 April.

However, Brussels is not thought likely to have any objections, having given the green light to the proposed takeover of BSkyB by News Corporation in 2010-11.

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