Directors of British Sky Broadcasting have rejected a £7 (E8.4) a share bid from Rupert Murdoch’s News Corp to take full control of the pay TV platform. The bid for the 61 per cent it does not already control valued the company at £12 billion. Last night’s close was at 600.5p, shares in BSkyB opened 21 per cent up at 727p. By Tuesday afternoon they’d climbed another 19 per cent.
In a statement that reflects the fact that News Corp’s 39 per cent holding means there will be no other bids, the board has said that it will engage in the process but that it expects a price of £8 a share (about £13 billion) for full value. It has also said it will proceed and cooperate with the regulatory process even if the bids success looks unlikely on the basis News may come back at a later stage. It has also agreed it will not, therefore, enact the six month ‘put up or shut up’ rule available to any public company that is subject to a bid. It has also built in some (small) penalties to cover BskyB expenses should the bid be blocked or not go ahead.
The bid is being led by Chase Carey long time News exec and former head of DirecTV. James Murdoch, head of News Europe and Asia, has to take a back seat because of his role as chair of BskyB.
News is able to make the bid as it has hoarded cash through the recession and has $8.2 billion to hand. While some News shareholders will be disappointed it’s not going on a stock buyback many will be happy the bid this time is for a business they know well and that has strong and proven cashflows.
As well as accepting no other buyer will emerge while News has such a big stake, other holders know that while News has that stake there will always be a share premium discount, partly because of the holding, and partly for Murdoch’s taste for expensive development investment – digital, HD, 3D, etc.
Will regulators allow the bid? News has probably taken the view that as regulators clearly already treat BskyB as if News controls it, then this might not be as big a hurdle as some expect. It’s another reason – as is the fact the regulator’s consideration will doubtless be time consuming – other shareholders will cheerfully sell up if their price demands are met.
Most recent figures show that BSkyB made a pre-tax profit of £707 million in the nine months to March, up from £339 million a year earlier.