Sky shares fall amid jitters over Fox bid

Sky was under the cosh on Friday amid jitters over 21st Century Fox's $14bn bid to buy out the 61% of the London-listed broadcaster it doesn't already own, after the Tories failed to get a majority in the election.

Ofcom's report on Fox's suitability to buy Sky is due on 20 June, with the Secretary of State at the Department for Culture, Media & Sport set to either approve the deal or refer it to the Competition and Markets Authority. However, with the hung parliament it is now unclear who the culture minister will be on that date.

RBC Capital Markets said: "Assuming a Conservative/DUP minority government, we would expect last night’s spread of around 8% to widen slightly reflecting heightened risk until the 20th June report. Assuming a Conservative Secretary of State, and a benign Ofcom report, we still expect approval.

"Post 20th June, an approval would lead to the risk arb spread likely tightening to around 3-4% (ie. £10.30-£10.40 versus £10.75 offer). A referral of the deal to the CMA would lead to a widening to around 15% (circa £9.15) in our view. A rejection (or a Labour-led coalition) would result in Sky trading as a ‘broken deal’, and we see 800p as a likely floor."

Meanwhile, Olivetree Financial said the main questions market participants are asking with respect to Sky are whether there is likely to be a non-Conservative government now; whether May will resign and there therefore her ally Karen Bradley will potentially lose her culture secretary job; and whether this will add meaningfully to the timeline, either through the time taken to form a coalition, the time taken to pick up the Ofcom process again or the likely impact on a CMA review.

"From the conversations we have had, the focus is more on the latter of these. Of course it is no surprise to see Sky shares trading off this morning, and the election result is unhelpful. The market has never liked potential delays to the Sky timeline, given the potential for headline risk and combining this with the vagaries of political change / instability is never great. But in essence the bear case in Sky doesn’t get much more fuelled than that this morning. From a trading perspective we’ve seen a reasonably balanced two-way flow, it is hard to envisage a meaningful move in either direction in the absence of more dramatic news flow."

At 1045 BST, Sky shares were down 2.2% to 965.50p.