Sky takeover decision expected next week

(c) Sky News 2017: <a href="http://news.sky.com/story/regulators-cma-and-ofcom-deliver-sky-takeover-reports-10921364">Sky takeover decision expected next week</a>
 

Karen Bradley, the Secretary of State for Culture, Media and Sport, is expected to give her verdict on 21st Century Fox's £18.5bn takeover of Sky plc (Frankfurt: 893517 - news) , the owner of Sky News, by Thursday next week.

Ms Bradley confirmed on Tuesday afternoon that she has now received a report from Ofcom, the broadcasting and telecoms regulator, on whether it would be in the public interest for the deal to go ahead.

She (Munich: SOQ.MU - news) said she had also received a parallel report on the takeover by the Competition and Markets Authority (CMA) and a separate report from Ofcom into whether the directors of Fox, the world's fourth-largest media company after Comcast (Swiss: CMCSA.SW - news) , Disney and Time Warner (Frankfurt: A0RGAY - news) , were "fit and proper" to hold a UK broadcasting licence.

The Secretary of State said she was aiming to give an oral statement to Parliament on the matter by 29 June. There would then be a further opportunity for interested parties to make further representations.

Fox, the international film and television giant behind hit shows like The Simpsons and Modern Family, already owns a 39.1% stake in Sky. It tabled a proposal just before Christmas to buy the remainder of the company for £11.7bn, valuing the whole of Sky at £18.5bn.

Ms Bradley asked Ofcom in March to investigate, under the 2002 Enterprise Act, whether the takeover was in the public interest on the grounds of media plurality and broadcasting standards.

The plurality issue concerned whether the Murdoch family, which is a major shareholder in both News Corporation (Frankfurt: A1W048 - news) - the owner of The Sun, The Times and the Sunday Times - and Fox, would emerge from a takeover with too large a share of the UK news market.

The broadcasting standards issue strand of the investigation was an assessment of Fox's commitment to uphold UK broadcasting standards.

Ofcom also simultaneously carried out an examination of whether Fox and its senior directors were "fit and proper", in the industry jargon, to hold UK broadcasting licences.

That followed complaints from critics of the Murdoch family including Ed Miliband, the former Labour leader, and Sir Vince Cable, the former business secretary.

On the plurality issue, Fox is thought to have argued that the takeover would not lead to a concentration of UK media assets due to recent changes in the UK media landscape, highlighting how, due to the rapid proliferation of the internet, there is more choice and diversity in the news market than before.

Newspaper circulation has declined by almost two-fifths during the current decade while the rise of web-based news providers such as Buzzfeed, along with the way the likes of Google, Facebook (NasdaqGS: FB - news) and Twitter (Frankfurt: A1W6XZ - news) have changed the way people consume news, mean that the combined share of News Corp and Fox of the UK news market has fallen.

Together, the pair would own just three of the top 15 UK news providers by audience reach - Sky News, The Sun and the Sky News website. The BBC alone, meanwhile, accounts for seven of the top 15 providers.

The 'fit and proper' issue is thought to have occupied more of Ofcom's time. The regulator received representations from critics of Fox, including Mr Miliband and Sir Vince.

It also held a meeting with Wendy Walsh, one of five women who claims to have suffered sexual harassment at the hands of Bill O'Reilly, a former star presenter on Fox News who was fired in April.

Ms Bradley must now decide, based on the reports she has received from Ofcom and the CMA, whether or not the takeover would operate against the public interest.

If she decides that it would do so, she can then refer the takeover to the CMA for a full review, a process that would take six months.

Alternatively, she may decide to allow the deal to go ahead, or allow it to go ahead subject to Fox meeting certain conditions.

She said: "I will aim to give my initial 'minded to' decision, publish the CMA and Ofcom public interest reports - in line with the Enterprise Act 2002 - and return to Parliament to make an oral statement by Thursday 29 June.

"There will then be an opportunity for representations to be made before I make a final decision.

"In the meantime, given the quasi-judicial nature of the process, I am unable to comment substantively on the matter of the case.

"My priority remains - as it has throughout this proposed merger - to make my decision independently, following a process that is scrupulously fair and impartial, and as quickly as possible."

Sky first received a takeover approach from News Corporation, then the owner of Fox, in June 2010. That bid was also referred to Ofcom, which agreed to allow the deal to go through, provided Sky News was spun off into a separate company.

However, the following July, the bid was dropped following public anger at revelations that the News of the World had hacked the mobile phone of murdered teenager Milly Dowler.

News Corporation subsequently demerged into two businesses.

One, continuing under the name News Corporation, is largely a publishing company that owns titles including the Wall Street Journal, The Australian, the New York Post, The Sun, The Times and the Sunday Times, as well as the commercial radio broadcaster Talk Radio.

The other, 21st Century Fox, owns film and television assets around the world. Its only UK asset at present is its existing shareholding in Sky.

A separate review by the European Commission has already given a green light to the takeover.

Shares (Berlin: DI6.BE - news) of Sky, which are valued at 1075p each under the takeover, were down 1.5p at 958.5p at 3.10pm on Tuesday.

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