Bloomberg News

Fox Mulls Using Sky Sale to Boost Time Warner Bid

July 21, 2014

Billionaire Rupert Murdoch

Rupert Murdoch’s 21st Century Fox Inc. may reach an agreement to sell its holdings in Sky Italia and Sky Deutschland AG to British Sky Broadcasting Group Plc in the next two weeks, people said asking not to be identified because the deliberations are private. Photographer: Jason South/The AGE/Fairfax Media via Getty Images

Rupert Murdoch’s 21st Century Fox Inc. (FOXA:US) is considering using proceeds from the sale of its Italian and German pay-TV assets to boost its offer for Time Warner Inc. (TWX:US), according to two people familiar with the matter.

Fox may reach an agreement to sell its wholly-owned Sky Italia unit and its 57 percent stake in Sky Deutschland AG (SKYD) to British Sky Broadcasting Group Plc (BSY) in the next two weeks, the people said, asking not to be identified because the deliberations are private. The assets could be valued at about 10 billion euros ($13.5 billion), people familiar with the matter said in May. Fox owns a 39 percent stake in BSkyB.

The proceeds could give Murdoch additional cash for a Time Warner bid without having to borrow more. While Fox is willing to pay more than $75 billion after Time Warner’s board rejected its $85 per-share bid, no final decision has been made on whether to bump the offer, the people said. JPMorgan & Chase Co. (JPM:US), the biggest U.S. bank by assets, and Goldman Sachs Group Inc. (GS:US), the fifth-biggest, will help Murdoch finance the bid.

BSkyB and Fox disclosed their talks about a European transaction in May, weeks before Fox approached Time Warner.

Sky Deutschland shares advanced 3.8 percent to 6.66 euros at 3:39 p.m. in Frankfurt trading. BSkyB fell 1.6 percent to 903 pence in London. Fox dropped 0.3 percent to $32.90 and Time Warner declined 0.3 percent to $87.01 in New York.

A deal with New York-based Time Warner would reshape the media industry by giving Fox more clout in negotiations with pay-TV providers, which are pursuing their own mergers to build scale. Comcast Corp. agreed to acquire Time Warner Cable Inc. and AT&T Inc. struck a deal to buy DirecTV in recent months -- the two largest acquisitions of 2014. A Fox deal for Time Warner would trump both in size.

Agreement Looms

A Time Warner transaction could also trigger the sale of Fox’s stake in BSkyB, according to Credit Suisse Group AG analysts. BSkyB’s 39 percent holding has a market value of 5.6 billion pounds ($9.6 billion). Murdoch and his son James had tried twice to win control of BSkyB, most recently in 2011, when political fallout from a phone-hacking scandal at one of Murdoch’s U.K. newspapers prompted him to abandon the bid.

A sale of the BSkyB stake could help Fox boost the cash portion of its offer for Time Warner, Credit Suisse said last week in a note.

Julie Henderson, a spokeswoman for New York-based Fox, didn’t respond to a request for comment. Alice Macandrew, a BSkyB spokeswoman, declined to comment.

The Sunday Times reported yesterday that BSkyB Chief Executive Officer Jeremy Darroch is close to agreeing to a price for the purchase of the European assets from Fox.

Love Productions

A deal would give BSkyB, already the biggest pay-TV provider in the U.K., oversight of companies that sell satellite and cable programs to 8.5 million homes across Germany and Italy. By shedding the continental units, Fox would be left with cable and broadcast networks plus movie and TV studios, making it more attractive to investors who want to bet solely on video production -- not distribution.

BSkyB today said it bought a 70 percent stake in the U.K.’s Love Productions, producer of the “Great British Bake-off” and TV documentaries such as “Benefits Street” and “Baby Borrowers.” Sky Vision, the international distribution unit of BSkyB, will distribute Love Productions content.

Last week, BSkyB sold a minority stake in ITV Plc, the U.K.’s biggest commercial broadcaster with top-rated shows such as “Downton Abbey,” to John Malone’s Liberty Global Plc for 481 million pounds.

To contact the reporters on this story: Matthew Campbell in London at mcampbell39@bloomberg.net; Alex Sherman in New York at asherman6@bloomberg.net; Manuel Baigorri in London at mbaigorri@bloomberg.net

To contact the editors responsible for this story: Kenneth Wong at kwong11@bloomberg.net; Aaron Kirchfeld at akirchfeld@bloomberg.net; Mohammed Hadi at mhadi1@bloomberg.net Robert Valpuesta


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Companies Mentioned

  • FOXA
    (Twenty-First Century Fox Inc)
    • $38.51 USD
    • 0.76
    • 1.97%
  • TWX
    (Time Warner Inc)
    • $84.93 USD
    • 0.55
    • 0.65%
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