By Kate Holton and Paul Sandle
LONDON Rupert Murdoch's Twenty-First Century Fox (FOXA.O) has struck a $14.6 billion deal to buy European pay-TV firm Sky (SKYB.L) that consolidates a media empire across two continents and helps it take on rivals like Netflix in the battle for viewers. Fox, which announced a preliminary deal on Friday, said it would pay 10.75 pounds per share - or 11.6 billion pounds - for the 61 percent of Sky it does not already own to fully acquire its 22 million customers in Britain, Ireland, Italy, Germany and Austria. People familiar with the matter have told Reuters that Fox pounced after Britain's vote to leave the European Union in June sent the pound down about 15 percent against the U.S. dollar and Sky's share price tumbling.After winning the backing of Sky's independent directors, Fox will need to secure regulatory approval in Europe and Britain and win over those smaller Sky shareholders who believe the price is too low. It will pay a 200-million-pound break fee if it fails to pull off the deal, and has opted for a scheme of arrangement - which means that, of those independent shareholders who vote, 75 percent must approve the takeover. "Sky is much more than a satellite distribution company, it's a creative, commercial and consumer powerhouse," James Murdoch, the chief executive of Fox and chairman of Sky, told analysts on a call. The deal comes five years after his father Rupert failed in a previous attempt to buy Sky when a newspaper phone hacking scandal at his News of the World tabloid derailed the offer and damaged his reputation in Britain.
Since then, the 85-year-old media mogul has split his business into two parts, with Fox housing the TV assets and his newspapers owned by News Corp (NWSA.O), and the company believes that should be enough to win regulatory backing. But critics will argue that despite the split, Murdoch and his sons James and Lachlan still control both firms. Murdoch holds a unique position in Britain, where former prime ministers such as Tony Blair and David Cameron once lined up to secure the media mogul's blessing and the backing of his newspapers. Critics say this has given him too much say over British public and political life.
The re-emergence of the Sky offer has already reignited opposition, with several politicians attending a debate in parliament this week to urge the government to properly scrutinize the deal. The price of 10.75 pounds per share, representing a premium of around 40 percent on the day before the initial proposal was received, has also disappointed several top-50 shareholders who accused Sky of selling out too cheaply to their founder and biggest shareholder.Shares in Sky were trading almost a pound below the offer price ahead of a regulatory process that is likely to take some time. Fox said it expected the acquisition to complete before the end of 2017. The deal is the latest one to marry distribution with content after AT&T Inc (T.N) announced an $85 billion bid to buy Time Warner Inc (TWX.N) earlier this year.
While Sky does produce its own content, including in news and sport, the deal will give Fox full ownership of a wider distribution platform in Europe.James Murdoch said the deal would enhance Fox's sports and entertainment scale, and give it the technological capability to reach consumers across multiple platforms. Fox will take on about $10 billion of debt to fund the deal, but said it would pay this down as quickly as possible. (Editing by Pravin Char)
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Updated Date: Dec 15, 2016 22:04:22 IST