News Corp. announced today that it had made a £7.8 billion offer for a 61% stake in British Sky Broadcasting Group PLC that it does not currently own. This translates roughly to 700 pence a share offer, as News Corp. attempts to totally consolidate the UK’s biggest pay TV Company. However, BSkyB reiterated that it would support an offer of over 800 pence a share, apparently after it had been advised accordingly by UBS and Morgan Stanley.
Regardless, the two companies went into an agreement aimed at working together to obtain the needed regulatory endorsements for a deal and agree on a price equally beneficial to all shareholders. BSkyB shares went up 19% to 714 pence in March when confirmation of the approach became apparent, making it the biggest raise on the bellwether FTSE 100 index.
Sky Deutschland, in which NEWS Corp. has a stake as well, had its shares rise by 8.3% while BSkyB’s main rival in the UK, Virgin Media Inc, experienced a decline in its shares of 1.8% to 1175 pence over fears of a stronger player under News Corp.’s ownership. News Corp.’s takeover investment proposal comes after last week’s initial 675 pence a share offer it had earlier proposed to BSkyB’s board, but was kept secret till today.
Currently, News Corp has a controlling stake of 39.1% in BSkyB and the company’s deputy chairman, Chase Carey, said in a statement that the company believes this is the right time for BSkyB to become a fully News Corp. owned business with its greater scale and broader geographic reach.
The proposal presents News Corp. an opportunity to consolidate a core business with which it has been closely associated for over two decades, added the deputy Chairman. The company would also gain from the increased geographical diversification of its earnings base, reducing its exposure to recurring advertising revenues and increasing its direct consumer subscription revenues, he said.
BSkyB began in 1989 and has made its business mostly on owning the broadcasting rights to the UK soccer premierships. It has an estimated 9.77 million TV, Internet and telephone customers and hopes to raise this to about 10 million by December. Industry analysts expect that News Corp.’s bid for BSkyB might lead to other similar deals with other pay TV groups in which it owns a stake. According to News Corp. the new deal will be financed by a significant amount of its estimated $8.2 billion cash stockpile and borrowed funds.
June 16, 2010.