Yahoo Finance Sky investors on course for £171m payout over Fox delay
Sky shareholders are in line for a £171m payout as the £11.7bn takeover of the pay-TV giant by 21st Century Fox is repeatedly delayed by stumbles over regulatory hurdles.
Scrutiny of the deal is now expected to continue into next year and trigger a 10p per share special dividend.
The fail-safe payout was included in the terms of the takeover agreement to calm shareholder fears that controversy surrounding the Murdoch family could derail their ambition to own Sky outright for a second time. The company will report full-year results this week and has suspended its normal dividend while the Fox takeover faces scrutiny.
Fox already owns 39pc of Sky so will receive a payout of around £67m. The remainder of around £105m will go to independent shareholders.
The Murdochs were frustrated again last week when Karen Bradley, the Culture Secretary, said she needed more time to make a final decision on referring the merger to the Competition and Markets Authority (CMA). The move has stoked concern at Fox and Sky that the referral could be delayed until after Parliament returns from recess in September.
The companies also fear the Government’s weakness in the Commons will allow opponents of the deal to force Ms Bradley to look again at Fox’s record on broadcasting standards. On advice from Ofcom she had previously said she would ask the CMA to investigate only the impact full Murdoch control of Sky would have on media plurality.
The delays are a threat to Fox’s plans. Once launched, the CMA investigation could take up to six months, meaning Sky is likely to face a crucial Premier League rights auction before the deal is completed.
Assuming the Murdochs win approval from the competition watchdog, Fox will then need the go-ahead from Sky shareholders. It has chosen to pursue a court-backed scheme of arrangement, which means a lower approval threshold of 75pc to squeeze out minorities. At a minimum of two months takes longer than a normal takeover offer, however.
The timetable is becoming uncomfortably tight for Fox. Its agreement with Sky includes a “regulatory long stop” date of Aug 15 next year. If regulatory scrutiny is not completed by then Fox would have to pay a £200m break fee and the deal would collapse. According to analysts at Jefferies, investors are pricing Sky shares to reflect a two-in-five chance Fox’s bid will fail. On Friday they closed at 970.5p, short of the £10.75 offer price.
Sky has warned that uncertainty and delays to the deal could damage its ability to invest in the UK. The company’s full-year results this week are expected to show continued growth, however, with revenues topping £1bn per month for the first time.
Sky is also expected to highlight its growing reach after Netflix hit the 100 million subscriber milestone last week. It is understood Sky’s combination of satellite and Now TV streaming subscriptions is now accessed by the same number of people.
The company is aiming to accelerate the growth of Now TV with a launch of the service this year in Spain. The plans will mark Sky’s first expansion beyond its satellite footprint.
