News Corp’s BSkyB bid: deal could be agreed before end of July

Two sides expected to agree price to tie-in with BSkyB’s financial results Rupert Murdoch’s News Corp and BSkyB could agree the terms of a £9.3bn takeover bid as early as 29 July, when the satellite broadcaster is due to announce its full-year results. The culture secretary, Jeremy Hunt, gave News Corp the green light to acquire the 60.9% of BSkyB it does not already own on Thursday – subject to a short public consultation that ends midday 8 July – on the proviso that Sky News is spun off as a separate company to allay plurality concerns. Observers believe Hunt is keen to give final confirmation by 19 July when the summer parliamentary recess begins – otherwise the decision will be delayed until parliament returns on 5 September. Nick Bell, equity analyst at Jefferies, says there is a strong possibility the two sides will reach the terms of agreement on price by 29 July to tie-in with BSkyB’s financial results. He adds there is a couple of “sticking points” – how to value Sky News and including the BSkyB’s final dividend in the bid price – but doesn’t see these as a major impediment to agreeing a price. This view is supported by Chris Goodall, an analyst at Enders, who argues the two sides are likely to reach agreement on price “within a month” of Hunt’s final approval. “Negotiations between News Corporation and the independent BSkyB directors are essentially about price,” said Bell. Jefferies argues News Corp has the upper hand in negotiations because it is the only potential buyer of the stake, and with “evidence of a consumer slowdown” starting to hit BSkyB’s customer churn rate the cash-generating juggernaut may not be as impervious to any downturn as has been widely forecast. In addition while News Corp is keen to seek a deal recommended by BSkyB’s directors – to then pursue a scheme of arrangement to secure the deal with a shareholder vote – if it had to go the more complex, expensive route of a hostile takeover the company clearly has the upper hand. Under an agreement struck between News Corp and BSkyB after it made its initial approach last June, the two sides have two months to reach a recommended deal with Sky’s independent directors from when Hunt gives final approval. If this is not successful then over the following three-month period any offer by News Corp would need acceptance of 70% of Sky’s shareholders – News Corp already owns 39.1% so the company would need the support of half of the investors controlling the remaining 70%. Jefferies points out that, if necessary, News Corp can push the threat of reaching 75% control at which point it has the power to de-list BSkyB from the stockmarket. “Most hedge funds and other fund managers have an investor remit [to deal] only in publicly listed securities, so if push came to shove News Corporation could force the situation to de-list and they would have to sell,” said one City source. In addition under the terms of last June’s agreement if News Corp fails to strike a deal after five months it will have to pay BSkyB a £38.5m fee but would then be able to seek a deal requiring just 50.1% shareholder approval. “News Corporation’s leverage over BSkyB gets better over time,” said a second City source. A group of shareholders are pushing for News Corp to up its original 700p offer – made when BSkyB was trading at under 600p – to potentially as high as £11. Those calling for a dramatically increased offer include Crispin Odey, founder of Odey Asset Management which has a 2.7% stake in Sky, and Fidelity which would mean News Corp would have to find well over £11bn. However Jefferies believe an agreeable bid price will be about 850p plus final dividend, which the company believes will be about 15.7p, meaning News Corp will effectively have to make an offer somewhere in the region of 866p. Analysts at Numis have argued for 850p while city sources suggest BSkyB’s independent directors are keener on 875p. News Corp proposed a 700p a share offer last June – when BSkyB was trading under 600p – which equates to about £7.8bn. If it ups its offer to 875p it will have to beef up its offer to about £9.3bn – a further £1.5bn. If everything were to go smoothly in the takeover process News Corp could complete the transaction by the middle of October. • To contact the MediaGuardian news desk email editor@mediaguardian.co.uk or phone 020 3353 3857. For all other inquiries please call the main Guardian switchboard on 020 3353 2000. If you are writing a comment for publication, please mark clearly “for publication”. • To get the latest media news to your desktop or mobile, follow MediaGuardian on Twitter and Facebook . News Corporation Media business BSkyB Television industry Rupert Murdoch Jeremy Hunt Mark Sweney guardian.co.uk

Posted by on June 30, 2011. Filed under News, Politics, World News. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.