Thursday, 27 July 2017

UK competition watchdog likely to probe Fox/Sky deal

By Nick Wood, Total Telecom
Thursday 29 June 17

Companies given until 14 July to respond to culture secretary's quasi-judicial ruling.

21st Century Fox's £11.7 billion (€14 billion) acquisition of Sky could face a considerable delay, after the U.K. government said it is likely to refer the deal to the Competition and Markets Authority (CMA). Addressing Parliament, Karen Bradley, secretary of state for culture, media and sport, said a review by telco and media watchdog Ofcom has concluded that the proposed merger raises public interest concerns related to media mogul Rupert Murdoch's influence over the U…

21st Century Fox's £11.7 billion (€14 billion) acquisition of Sky could face a considerable delay, after the U.K. government said it is likely to refer the deal to the Competition and Markets Authority (CMA).

Addressing Parliament, Karen Bradley, secretary of state for culture, media and sport, said a review by telco and media watchdog Ofcom has concluded that the proposed merger raises public interest concerns related to media mogul Rupert Murdoch's influence over the U.K. news agenda and the political process.

"On the basis of Ofcom's assessment, I confirm that I am minded to refer to a Phase 2 investigation, on the grounds of media plurality," Bradley said.

Phase 2 CMA investigations include written and oral submissions from the merging parties and interested third parties, and can take more than six months to complete.

Fox and Sky have until 14 July to respond to Bradley's quasi-judicial ruling. During this period, the companies could offer concessions in a bid to avoid a Phase 2 investigation.

"We think there is a high probability of the deal being referred to the CMA but that ultimately a mutually acceptable set of remedies should be found," said RBC Capital analyst Wilton Fry, in an investor note.

Fox agreed to buy the 60.9% of U.K.-based TV and broadband provider Sky that it does not already own in December 2016.

At the time, Fox said the merger would create a global leader in content creation and distribution, and give it leading direct-to-consumer capabilities.

It marks the second attempt by Rupert Murdoch to acquire full control of Sky.

Murdoch's former company, News Corp, launched in 2010 a £12 billion bid for the outstanding 60.9% stake in Sky – then called BSkyB – that it didn't already own.

The acquisition was abandoned amid staunch political opposition that became particularly vociferous after News Corp's now-defunct tabloid, the News of the World, was revealed to have hacked the voicemails of politicians, celebrities, and even murder victims and their families.

The scandal forced News Corp to split into two distinct firms. 21st Century Fox took control of the company's media assets, including its 39.1% stake in Sky, while a new News Corp took ownership of the publishing business.

However, it became clear in January 2016 that Fox had not given up on Sky, when the latter appointed Rupert Murdoch's son and Fox CEO James Murdoch as its chairman.

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