Market Insight

Fox proposes sale of Sky News to Disney

April 04, 2018

Tim Westcott Tim Westcott Director – Research and Analysis, Programming, IHS Markit
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The Walt Disney Company could acquire Sky News to enable the full takeover of Sky by 21st Century Fox. Walt Disney Co's acquisition of the UK-based news channel would not be conditional on its own deal to acquire entertainment assets from Fox - including its 39% interest in Sky - going ahead. 

The possible sale of Sky News to Disney is one of two proposals published by 21st Century Fox yesterday aimed at removing regulatory obstacles to its proposed full takeover of Sky. Proposal one is the legal separation between Sky News and the rest of Sky, with the news channel operating independently and its own board. Funding would be guaranteed by Fox for 15 years. The Fox statement added that Disney has 'expressed an interest' in buying Sky News if this does not satisfy UK regulators. 

The acquisition by Fox of the 61% of shares in Sky that it does not already own has so far been blocked because of Sky's ownership links via the Murdoch family to UK national newspapers including The Sun and The Times. The Competition and Markets Authority (CMA) in January published a provisional finding that the acquisition was not in the public interest. The CMA is due to publish its final ruling before 1 May.

The 21st Century Fox offer to acquire full control of Sky was made public in December 2016, but has still not been approved. The UK government referred the deal on grounds of media plurality and broadcasting standards. With the deal in regulatory limbo, Fox has since agreed to sell most of its entertainment assets, including its Sky stake, to Walt Disney Co. In February, Comcast said that it was considering a possible bid to acquire Sky.

Our analysis

The latest proposal by 21st Century Fox to allay fears about the undue influence of the Murdochs over public option in the UK may mean that an end to the Fox/Sky saga is in sight. Fox, which in its statement said it now looked forward 'to concluding this acquisition—finally—in a timely and expeditious manner'. 

The legal separation of Sky News from the rest of the group is similar to the solution imposed by UK regulators on BT and its wholesale arm Openreach. However, the suggestion of a sale to Disney implies that even Fox has doubts about whether this will be enough to achieve the speedy approval of the takeover. It must also be said also that a mere statement that Disney is 'interested' in buying the loss-making Sky News it its own right is not the same thing as an actual deal. Disney owns ABC News in the US but scaled back its interest in international news when it sold its stake in the news agency WTN some 20 years ago.

It remains to be seen whether the new proposals are enough to persuade the CMA to alter its opinion on the deal later this month - and then whether the UK government, and the secretary of state for digital culture, media and sport Matt Hancock (appointed in January this year), will be minded to allow the Fox deal to go ahead. 

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