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May 8, 2018

The Sky plotsaga has yet more twists in the takeover | plot - May 8,2018. | The Telegraph

telegraph.co.uk

The Sky saga has yet more twists in the takeover plot



The Sky takeover saga has had more shifting deadlines than a satellite repeat of Homes Under the Hammer but here’s yet another one that may trump all the rest. June 12.
That is the day by which US District Judge Richard Leon has promised to deliver a decision in the antitrust trial over the takeover of Time Warner, owner of CNN and HBO, by the telecoms giant AT&T.
The deal is opposed by Donald Trump and the Department of Justice but AT&T boss Randall Stephenson has battled on.
He and many others are convinced that in a world of trillion-dollar monsters from Silicon Valley, a mere $85bn (£63bn) merger between two companies that do not directly compete should be allowed.
If Stephenson prevails next month, the potential ramifications for Sky of an approval or rejection of the deal are massive and further complicate a situation that is already more confusing than Sky’s recent Twin Peaks reboot.
As things stand, 21st Century Fox and Comcast have made competing bids for Sky. Comcast gatecrashed in February with a more generous bid that probably faces lower regulatory hurdles. The EU is due to rule on whether to approve the potential deal of conduct an in-depth investigation by June 15.
Murdoch-controlled Fox could increase its bid if it gets approval to buy Sky from the Culture Secretary Matt Hancock, who has until June 13 to make a decision and could act sooner. If not the middle week of June looks quite crowded.

Matt Hancock has just over a month to decide on whether to approve Fox's Sky purchase Credit: Jeff Gilbert
For the holders of the 61pc of Sky shares not owned by Fox, the ideal situation would be approval and a straight auction. The field would not be totally level. Fox after all starts with 39pc of Sky and can switch its offer from a scheme of arrangement to a vanilla takeover that only requires 50pc plus one share to succeed.
In that scenario other shareholders would look to Martin Gilbert and the independent directors to maintain the lock up that prevents Fox buying more shares on the market, to ensure a shoot-out takes place. Normally Fox would be comprehensively outgunned by Comcast, had it not agreed to sell most of its assets on to Disney, which is trying to bulk up in anticipation of coming clashes with Silicon Valley.
Disney lacks the direct relationships with consumers that are expected to be essential to stand up to Netflix and Amazon and wants Sky to plug the gap. It could give Fox plenty of latitude to bid up against Comcast. This is where Judge Leon could take a starring role. When the Murdoch clan agreed to sell most of their entertainment empire to Disney last year, they also fielded interest from Comcast. The political opposition to the “vertical” merger of AT&T and Time Warner tilted the pitch in favour of Disney, however.
In the eyes of regulators, a combination of Comcast’s vast cable distribution network and Fox’s film and television assets could look quite similar to AT&T’s plans. Disney is meanwhile merely a rival media owner pursuing a “horizontal” deal with Fox.
Such a merger would not be unopposed, particularly in Europe where the likes of Virgin Media owner Liberty Global would fear consolidation of two film suppliers and its biggest rival, Sky.
Nevertheless in Fox’s eyes Disney looked the less risky option compared with Comcast.
Yet if AT&T defeats the government opposition to its takeover of Time Warner, Comcast is likely to revive its interest in the big deal with the Murdoch family. It wants Sky and has seized its opportunity in the UK, but it also wants the Hollywood film studio, the cable channels and the 30pc stake in the US Netflix rival Hulu. It certainly doesn’t want Disney to have them.
For holders of the 61pc of Sky shares not owned by Fox, the ideal is a straight auction
It emerged over the long weekend that Comcast has been gathering the necessary financial firepower, some $60bn in cash, versus $52bn in Disney shares.
If the court backs AT&T and gives the green light to a mega-merger of media and telecoms, Comcast chief executive Brian Roberts looks likely to mount another raid. And if he succeeds in usurping Disney at the court of Murdoch, an auction for Sky looks less likely.
The two current bidders – Fox and Comcast – would become one.

Comcast's Brian Roberts Credit: Jeff Chiu/AP
Bob Iger, Disney’s chief executive, could make his own bid for Sky, but he would be up against a bidder with a 39pc stake in the bag and regulatory approval well under way if not sealed.
That is why news of Comcast’s manoeuvrings in the credit markets on Tuesday prompted a sell-off of Sky shares.
They fell more than 1.6pc as the hedge funds which have attempted to predict the many twists and turns of the Sky takeover estimated the risk that the cold war between Comcast and Disney may never turn hot, at least in the UK. That said the shares remain a pound above Comcast’s £12.50 offer, the best currently on the table.
It is entirely possible that Judge Leon will rule against AT&T, of course. Comcast would then have to make do with fighting it out for Sky.
It means the independent Sky shareholders now find themselves lined up alongside Trump, who it has been claimed opposes the AT&T takeover of Time Warner because of his hatred of CNN. News has always been at the centre of wrangling over Sky. So-called “fake news” and a US court could deliver the denouement.