Rupert Murdoch has finally gone public with his plan to snap up the 61% of BSkyB that he doesn’t already own, but the satellite broadcaster is not rolling over without a fight: it’s rejected the offer as too low. It's an odd situation, in that News Corp boss James Murdoch is chairman of the BSkyB board. But it looks pretty likely that the Murdochs will eventually get their hands on Britain’s Most Admired Company (as voted by its peers) – assuming regulators or governments don’t throw a spanner in the works...
News Corp, which already owns a 39% stake in BSkyB, has made an offer of 700p per share for the rest, valuing BSkyB at about £12bn. As widely predicted, News Corp plans to use its $8.2bn cash reserves (Murdoch must have an awfully big penny jar) to fund the deal, saying this is the ‘right time’ for BSkyB to become a ‘wholly-owned part’ of the company. It also suggests that joining the News Corp empire would allow Sky to extend its geographical reach beyond the UK.
However, Sky is playing hardball, saying that it won’t get out of bed for anything less than 800p. And it can afford to. Despite the recession, it’s had a great couple of years: its subscriber base is inching ever-closer to 10m, its big investment in HD TV seems to be paying off, it’s leading the pack in 3D TV, it’s set to post profits of more than £1bn this year, and its peers have voted it Britain’s Most Admired public company. What’s more, its shares soared by a fifth today after news of the offer emerged, sending its stock price comfortably above the 700p mark. This suggests the market is expecting a higher offer – and it was notable that although Sky rebuffed this bid, it’s agreed to hold further talks. So a deal isn't a million miles away.
But there will be obstacles to navigate first. The idea of Murdoch extending his influence over the UK media still further (this deal would make News Corp the UK’s largest media company, with estimated revenues of £8bn) is sure to generate a lot of public controversy. And this could put the Government in an awkward position: David Cameron’s Tories clearly benefited from Murdoch’s support during the Election, but if this deal is just waved through, he could face accusations of partiality – especially since the Government has the right to take over scrutiny from the European competition regulator. Tricky.
Still, Murdoch seems confident: he’s already agreed to pay BSkyB £20m in costs if the deal isn’t cleared, and almost twice that if he ends up not making a bid. And we’re not entirely convinced it would be quite as dangerous as some media pundits seem to think. It could rather undermine Sky News’ insistence on its objectivity (cf. Adam Boulton), but no more so than the Times, for instance. Most punters probably won’t notice much difference...
In today's bulletin:
BSkyB shares rocket after News Corp takeover bid
Tesco looks abroad as UK sales growth grinds to a halt
Inflation finally falls - but house prices shooting up again
Letters from Malawi: Bribery without corruption
Do ex-CEOs make better chairmen than outsiders?