Sky takeover bid: Shareholders demand increased offer and assurances over James Murdoch’s role

‘This can’t be an arms-length deal’, because of Murdoch’s involvement in both companies

(Reuters)

Sky shareholders have demanded a higher takeover price from Rupert Murdoch’s Fox and reassurances over the independence of the media mogul’s son.

Fox tabled a £10.75 per share offer on Friday, valuing Sky at £18.5bn. James Murdoch is Sky’s chairman and 21st Century Fox’s chief executive.

Thomas Moore, investment director at Standard Life Investments which owns Sky shares, told the BBC that “this can’t be an arms-length deal”, because of Murdoch’s involvement in both companies.

“There’s heavy representation of people aligned with Rupert Murdoch, not just James Murdoch,” he said.

“Shareholders – our clients, ultimately – are reliant on this independent board to come up with a solution which will represent proper value. There are concerns, given the composition of the board, that that cannot be the case. We would hope this is a starting bid and on reflection they will appreciate that a higher bid is more appropriate.”

Sky shares were down 33 per cent so far this year before Fox’s offer emerged. “In terms of valuation, the offer is at the low end, considering stock price levels at the end of last year as well as our internal intrinsic value,” said Kai Fachinger, senior portfolio manager at RobecoSAM, a minority Sky shareholder.

Fox already owns 39 per cent of Sky and has until 6 January to announce a firm offer. The Culture Secretary Karen Bradley then has 10 days to decide whether to refer the deal to the media regulator, Ofcom. The key issue is whether the deal would damage media plurality.

Former Labour leader Ed Miliband has called on Theresa May to refer the bid to both Ofcom and the Competition and Markets Authority (CMA). Vince Cable, the former business secretary who referred Murdoch’s previous 2010 bid for a public interest test, said on Friday: “The way Theresa May’s government deals with this is a test of their independence from the influence of large proprietors.”

During the previous bid, then culture secretary Jeremy Hunt was accused of having an overly close relationship with the Murdochs. The company was forced to abandon its plans after a political backlash over the phone-hacking scandal involving News International.

Jerry Dellis, equity analyst at Jefferies, said: “Fox’s promise that a merger would secure the UK’s position as a major hub for content generation and technological innovation may please Ofcom.”

The pound’s 16 per cent plunge against the dollar since the Brexit vote is also thought to have been a catalyst behind Fox’s swoop for Sky.

The deal is the latest example of “UK-quoted firms attracting an overseas predator and the pound’s post-Brexit plunge means more deals are likely”, Russ Mould, AJ Bell investment director, said.