Disney reportedly in talks to buy Fox's 39% stake in Sky

Sky

1,727.50p

16:34 06/11/18

0.09%

1.50p

Walt Disney is reported to have held negotiations with 21st Century Fox over the sale of a large part of its operations, including its share of Sky.

Twenty-First Century Fox Inc Class A

$49.69

11:04 08/08/19

0.00%

$0.00

Walt Disney Co.

$115.08

11:09 15/11/24

5.46%

$5.96

According to several reports in the US media, the talks have now ceased but had been taking place for various weeks, though analysts said regulators may force Disney to follow through with an offer.

Sources suggest that Fox owner Rupert Murdoch and other senior executives are leaning towards streamlining the company’s efforts towards focusing on news and sports, while offloading its entertainment operations.

Said to be included in the potential deal is Fox’s 39% stake in UK broadcasting giant Sky, with Fox left with a core of sport and news assets such as the Fox broadcasting network.

Following an order from the Department for Culture, Media and Sport, UK competition regulators said in October they would probe Fox's £11.7bn offer to purchase the remaining 61% stake of Sky.

Culture Secretary Karen Bradley referred the deal on UK media plurality and broadcasting standards, in particular the Murdoch family's ability to “influence the political agenda” alongside its ownership of the Times and Sun newspapers.

The move from Disney is said to include movie studio assets, TV production assets and other international operations.

Shares in Sky fell 1% on Tuesday, with Fox having gained 9.9% overnight and Disney up around 2%.

Analysts at OliveTree Financial said on Tuesday that the potential deal would have several implications for Sky and its potential takeover. They asserted that Disney may be forced into purchasing all of Sky as opposed to just Fox's 39% stake.

"Fox cannot sell its stake during the offer period to Disney at a price below 1,075p (Rule 4.2). In the event the deal were to break and Disney then tried to buy the 39% stake, then there is a strong chance that the panel would force Disney to make a bid for the whole of Sky in the event they bought the 39% stake," the analysts said.

"So at worst, in the event the deal gets blocked then we would have a likely purchaser waiting in the wings – a prospect that, prior to yesterday’s news, was not present. But for now, the concerns on buyer’s intent will dominate the price reaction in what has been a very tough week for risk arbitrage."