How Disney May Smooth Fox Acquisition of Sky

When Walt Disney Co. (NYSE: DIS) in December offered to pay $52.4 billion in stock for a big chunk of Twenty-First Century Fox Inc. (NASDAQ: FOXA), the deal included Fox’s 39% stake in European pay-TV giant Sky. In a filing Tuesday morning with the U.K.’s Competition and Markets Authority (CMA), Fox said the Disney is willing to acquire Sky News if the CMA approves Fox’s proposed acquisition of the remaining 61% of Sky.

In December 2016, Fox offered to pay around $16 billion to acquire the shares of Sky it does not own, but regulators have been wary of what the British regulator calls “media plurality concerns.” In plain language that means Fox (and the Murdoch Family Trust that owns a controlling stake in the company) would gain too much control of U.K. media and, therefore, too much influence over public opinion and U.K. politics.

Selling Sky News to Disney now instead of waiting for the Disney deal to go through is Fox’s way of trying to get its acquisition of all of Sky through the CMA. Disney would eventually get 100% of Sky in any event. To further complicate the issue, Comcast Corp. (NASDAQ: CMCSA) in February made an offer valued at around $30 billion for Sky.

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In the Fox proposal made this morning, Fox would spin off Sky News into a separate company and has promised to fund it for a total of 15 years. Fox previously had offered to fund Sky News for a 10-year period. The Murdoch trust also said neither it nor any Fox executive would seek to “influence or attempt to influence the editorial choices made by the head of Sky News.”

Fox also has threatened to shut down Sky News if regulators deny its bid for Sky. That would cost at least 500 jobs and raise different “media plurality concerns” that U.K. media regulator Ofcom has said may “present risks to plurality equal to or greater than those presented by the [Fox-Sky] transaction itself.”

In Tuesday’s premarket trading, Disney shares added about 0.2% to trade at $98.86, after dropping about 1.8% on Monday. The stock’s 52-week trading range is $96.20 to $116.10.

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