Kristen Schweizer and Anousha Sakoui London
Rupert Murdoch’s 21st Century Fox has agreed to sell its pay-TV businesses in Italy and Germany for more than $9 billion (R95bn), gaining funds it could use to increase an $80bn takeover bid for Time Warner.
British Sky Broadcasting (BSkyB), which is 39 percent owned by Fox, said on Friday it would pay £2.9bn (R52bn) in cash for Fox’s 57.4 percent stake in Sky Deutschland. BSkyB said it would use £2.07bn in cash and a stake in National Geographic Channel to pay for 100 percent of Sky Italia.
The deal will give Murdoch ammunition as the 83-year-old weighs how much he can raise an $85-a-share bid for Time Warner without jeopardising New York-based Fox’s investment-grade rating.
Fox said it would announce a new share buy-back programme next month.
BSkyB will become a European satellite and cable television service with 20 million subscribers, giving it leverage as it negotiates for rights to sports and entertainment.
Bloomberg first reported BSkyB’s talks with Fox on May 9 and said last week that Murdoch was considering using proceeds from the asset sales to increase his offer for Time Warner, owner of CNN, HBO and the Warner Brothers studios.
“This deal makes a lot of sense,” said Carlo Alberto Carnevale Maffe, a business professor at Milan’s Bocconi University. “Broadcasters must now compete in scale, scope and technology integration against new business models such as Netflix.
“The deal is also great for Murdoch since now he can keep on pursuing the Time Warner deal and fulfil his old dream of becoming the single entrepreneur in the global media industry with the largest content breadth and depth.”
Sky Deutschland added 1.4 percent to close at e6.75 (R95) in Frankfurt. BSkyB will offer e6.75 a share for the remaining stake. BSkyB fell 5.5 percent to £8.745 in London.
The deal allows Murdoch’s Fox empire to obtain cash and at the same time maintain a grip on European pay-TV assets within BSkyB, while pressing ahead with efforts to buy Time Warner.
Murdoch had for years considered combining the European operations. A full takeover bid by Murdoch for BSkyB was derailed in 2011 over the phone-hacking scandal at News Corp, his publishing empire. Last year, Fox and News Corp were split into separate publicly traded firms, with the Murdoch family maintaining large voting shares in both.
Murdoch’s offer of $85 a share in cash and non-voting Fox shares valued Time Warner at about $75bn, excluding options that could raise the total equity value to $80bn.
While people familiar with the matter have said that Fox would consider increasing its bid, Murdoch said that the company’s “number one priority is increasing shareholder value in a disciplined manner”.
“We will only consider transactions that fully support this objective,” the Fox chairman and chief executive said.
BSkyB said its 21 percent stake in National Geographic Channel, offered as part of the payment for Sky Italia, was valued at £382m.
BSkyB forecasts £200m in cash synergies by the end of the second year after completion of the transaction. It will fund the purchase through a mixture of debt and shares.
Sky Italia serves about 4.8 million paying households and Sky Deutschland has about 3.7 million customers.
“The three Sky businesses complement each other well and will be stronger together,” BSkyB chief executive Jeremy Darroch said. – Bloomberg