Sky faces $222m payout over Fox deal

European satcaster Sky looks set to pay £171m (US$222m) to shareholders as the company’s £11.7bn takeover by US giant 21st Century Fox is delayed by regulatory challenges.

Rupert Murdoch

Fox’s proposed takeover of Sky looks likely to become subject to a lengthy enquiry after UK culture secretary Karen Bradley said she was “minded” to refer the deal to the Competition and Markets Authority (CMA) because of concerns around media plurality.

Bradley is yet to make a decision on the referral, however, prompting concerns that any final ruling by the CMA will not be reached until well into 2018.

That will prompt a special dividend payment of 10p per share according to the Daily Telegraph, although Fox will receive around £69m of any payment because it owns 39% of Sky.

If regulators have not completed their investigations by August 15 next year the deal will be called off, forcing Fox to pay a £200m break clause fee.

The delays are allowing critics of the takeover, who fear it would hand Fox’s Rupert Murdoch too much power over the UK’s news agenda, more time to raise their objections.

Fox has already written to the UK government urging it to ignore “political pressure” from those who oppose the proposed takeover.

Fox had already proposed some undertakings to Ofcom prior to Bradley’s comments, including setting up a separate editorial board for Sky News and retaining the news division’s current funding levels for five years.

While Ofcom said the remedies would mitigate the plurality risk, Bradley said she was not inclined to accept the changes. Fox subsequently said it would not offer further concessions.

The takeover would hand Rupert Murdoch full control of Sky, which is already the largest pay TV operation in Europe, to go with the UK newspapers in his company News Corp, including The Times, The Sunday Times and The Sun.

Fox’s previous attempt to buy Sky was aborted in 2011 by Murdoch following the phone-hacking scandal that hit his UK newspaper empire.

More recently, the company has been hit by reports of sexual harassment at its US cablenet Fox News. Those allegations saw Fox News veterans Roger Ailes, who died earlier this year, and host Bill O’Reilly leave the company.

Around US$13m was reportedly paid to five women to settle their complaints over O’Reilly’s alleged behaviour.

The takeover plan had already received the green light from the European Commission’s competition authorities, which said its market investigation had found the proposed transaction “would raise no competition concerns,” and from media watchdogs in Ireland.

Sky agreed to sell the remaining 61% of its business not owned by Fox late last year.