Sky disappointed by 'delay' in Fox takeover investigation decision

(c) Sky News 2017: <a href="http://news.sky.com/story/government-says-decision-on-fox-takeover-of-sky-within-weeks-10954968">Sky disappointed by 'delay' in Fox takeover investigation decision</a>
 

Sky (Frankfurt: 893517 - news) , the owner of Sky News, today reacted with disappointment following a further delay to its proposed takeover by the US media giant 21st Century Fox.

Karen Bradley, the Secretary of State for Culture, Media and Sport, said she was not yet in a position to make a final decision on whether to send the deal for a full investigation by the British competition authorities.

Ms Bradley has already said she is "minded to" refer Fox's bid for Sky to the Competition & Markets Authority (CMA) for a so-called 'Phase 2' investigation on the grounds of media plurality. She (Munich: SOQ.MU - news) confirmed today that this was still the case.

However, she told MPs (BSE: MPSLTD.BO - news) , she was still wading through various representations made to her about the proposed takeover.

Ms Bradley added: "There has not been time to consider all the representations and I am not in a position today to make my final decision on referral."

The CMA is likely to require up to six months to carry out a full investigation from the moment the proposed takeover is referred to it - so both Fox and Sky are keen for that referral to happen as quickly as possible.

Sky reacted to her statement with disappointment.

It said: "Businesses require a level of certainty in order to plan and invest.

"As such, we are disappointed by this further delay. Almost eight months have now elapsed since the announcement of the offer, with decisions to clear the transaction received from all other relevant regulatory authorities, including the European Commission and the relevant authorities in all four of the other main jurisdictions in which we operate.

"In the UK, a thorough process has been concluded by the industry regulator Ofcom, which the Secretary of State has publicly acknowledged was "unequivocal" in its advice that there are no broadcasting standards concerns justifying a reference to the CMA.

"A decision by the Secretary of State on the next step in the process, whatever that may be, now needs to be made as swiftly as possible."

Fox, the world's fourth-largest media company after Comcast (Swiss: CMCSA.SW - news) , Disney and Time Warner (Frankfurt: A0RGAY - news) and the maker of hit TV shows like The Simpsons and Modern Family, already owns 39.1% of Sky.

Shortly before Christmas, it tabled a proposal to buy the remaining shares it does not already own for £11.7bn, valuing the whole of Sky at £18.5bn.

Ms Bradley subsequently referred the deal to telecoms and broadcasting watchdog Ofcom, and to the Competition & Markets Authority, asking the latter to carry out a so-called 'Phase 1' investigation.

Ofcom was asked to look at two issues - firstly that the deal would damage plurality of media ownership in the UK and secondly that Fox was committed to maintaining UK broadcasting standards.

It was also asked by Ms Bradley separately to assess whether Fox and its directors were 'fit and proper', in the jargon, to hold a UK broadcasting licence.

The regulator, following a three-month investigation, subsequently said that there was no reason to block the deal based on Fox's commitment to UK broadcasting standards. It also ruled that Fox and its directors were 'fit and proper' to hold a UK broadcasting licence.

Ofcom did, however, warn that the takeover could affect plurality of ownership.

In response, Fox guaranteed to continue investing in Sky News for the next five years on at least the same terms as present, while also promising to continue broadcasting under the Sky News brand for that time.

It also pledged to create an independent editorial board for Sky News that would, for example, have control over appointing the head of Sky News.

The regulator said these commitments were enough to mitigate its concerns on the plurality issue but Ms Bradley said Fox needed to go further and that, without extra undertakings, she was minded to refer the takeover to the CMA for a so-called 'Phase 2' investigation.

Ms Bradley revealed on Thursday that Fox has not made any new commitments or undertakings since Ofcom published its original verdict and said that therefore she was still minded to refer the deal to the CMA.

Since publishing Ofcom's analysis, Ms Bradley has been lobbied by a number of opponents of the deal, led by Ed Miliband, the former Labour leader, and Sir Vince Cable, the former business secretary. They have asked her to block the takeover and argued that Ofcom's guidance was wrong.

Earlier this week, 21st Century Fox responded, urging Ms Bradley not to delay the 'Phase 2' investigation.

In a strongly worded letter, the company's legal advisers, Allen & Overy, said that agreeing to the MPs' demands would "constitute the most blatant form of political interference".

Fox has also pointed out that, as its proposed takeover of Sky represents a significant investment into the UK, other overseas investors will be watching the Government's response closely before making their own decisions about investing in post-Brexit Britain.

It responded to the latest update from Ms Bradley by saying: "In light of the transaction's benefits to the UK creative economy, we would urge the Secretary of State to complete the regulatory process expeditiously."

She reminded the Commons that, under the 2002 Enterprise Act, she is obliged to make a decision without "undue delay" and said it was possible that she would refer the deal to the CMA while Parliament was in recess.

She said that, if this happened, she would write to all the parties involved and to the Commons Speaker, John Bercow, as well as the Labour Party.

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.

The deal attracted scrutiny since it would have brought Sky News into the same company as News Corp's UK media asset - The Sun, The News of the World, The Times and The Sunday Times. It was opposed by other newspaper publishers and, in response to regulatory concerns, BSkyB agreed to hive off Sky News as a separate company in the event of a takeover.

However, following revelations the following summer that the News of the World had hacked the mobile phone of murdered schoolgirl Milly Dowler, the takeover bid was abandoned.

Since then, News Corp has demerged its film and television assets outside Australia into a new company, 21st Century Fox, leaving it as a focused publishing business.

Apart from its UK newspaper titles, News Corp also owns the Wall Street Journal, The Australian, the New York Post and the book publisher Harper Collins, as well as UK radio stations including Talk Sport. 21st Century Fox, meanwhile, has no other UK assets other than its existing shareholding in Sky.

Critics, though, have argued that because Mr Murdoch and his family own shareholdings in both 21st Century Fox and News Corp, plurality of media ownership would be reduced by a takeover of Sky.

In response, Fox has argued that the media landscape has changed since the previous bid, with newspaper circulation falling by almost two-fifths since 2010. It has also pointed out that the rise of internet news suppliers such as Buzzfeed, along with digital and social media companies such as Google and Facebook (NasdaqGS: FB - news) , has changed the way people consume news.

It suggests this means the combined share of the UK news market enjoyed by News Corp and Fox has fallen. Critics of the deal have argued that, thanks to the rising popularity of The Sun's website, the combined share of the two companies may have increased. The Sun's online reach is now reckoned to lag only that of the BBC's website and the Mail Online.

Ofcom's own figures show that, of the 20 most-consumed sources of news in the UK, only three - Sky News, the Sky News website and The Sun - are owned by News Corp and Fox. The BBC alone accounts for seven.

The European Commission has already given the green light to the deal, as have individual regulators in the other countries in which Sky broadcasts.

Sky has more than 22 million customers in the UK, the Republic of Ireland (Other OTC: IRLD - news) , Germany, Austria and Italy.

Shares (Berlin: DI6.BE - news) of Sky, which are valued at 1075p under the proposed takeover, were up 4p at 969.5p at 1205.

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