News Corporation’s Rupert Murdoch seems to have persuaded UK culture secretary Jeremy Hunt that parking Sky News in some sort of trust is sufficient to allow News’ bid for pay-TV broadcaster BSkyB to evade the clutches of the Competition Commission and go forward to the BSkyB board and shareholders.
Murdoch’s current 700p bid for the 61 per cent of BSkyB he doesn’t own is equivalent to £13.2bn for the whole company burt that hardly looks sufficient given that yesterday BSkyB’s shares were trading at 755p and reached 768p earlier in the year. The BSkyB board (headed by James Murdoch who will presumably absent himself from proceedings) has already said it won’t consider anything below 800p.
But it’s easy to argue that BSkyB shares are actually worth somewhere north of £10 a share. The company has done the heavy lifting with the introduction of high definition, 3D and more than ten million subscribers so its profits, already substantial at more than £1bn a year, should soar despite the ever-growing cost of sports and movie rights.
Murdoch’s bid has been opposed by a gaggle of other UK media owners including the BBC (although it has since backtracked), the Mail and the Telegraph. They argue that full ownership of BSkyB by News would affect ‘plurality’ in the UK, which seems to be defined as a sufficient number of competing ‘independent’ points of view.
As News already owns the Sun, the News of the World, The Times and the Sunday Times as well as 39 per cent of BSkyB it is already far and away the most powerful commercial media owner in the UK and the Murdochs are not shy about using these outlets to further their own political views and preferences. At the moment they support the Conservatives, Jeremy Hunt’s party.
Their opponents have been able to point to the perceived horrors of News-owned Fox News in the US with its rabble-rousing right wing agenda to show what might happen to a hitherto admired news operation in the UK (Sky News) under full Murdoch ownership.
Sp parking Sky News in a trust of some kind (as opposed to relying on Murdoch promises of impartiality) looks a sensible move. Sky News loses about £40m a year so in essence this would be a (presumably everlasting) Murdoch subsidy to allow the deal for the entertainment and distribution core of Sky to go through.
But two issues remain. One is the price (see above) although Murdoch will argue that as he’s the only possible buyer (39 per cent would block a bid from anyone else) a relatively small premium to the current share price is justified. This is a poser and a half for the BSkyB board, in particular CEO Jeremy Darroch and independent director Allan Leighton, formerly head of Asda in the UK.
The other is the ongoing phone hacking scandal at News-owned the News of the World which is still wending its way through the courts as a large number of celebs, sportsmen and politicians demand to know the details of News’ activities.
If it transpires that any News executive at director level (in this case that would include subsidiary News International in the UK) knew about and therefore effectively condoned such illegal activities then the company might be deemed unsuitable to own a major British broadcaster outright.
So there are still a few significant hurdles for Murdoch to negotiate. But Rupert will be a happier bunny this morning.