Twenty-First Century Fox and Sky agree $14.6bn deal

February 2017 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

Creating a global leader in content creation and distribution, US multinational mass media corporation, Twenty-First Century Fox, Inc., and the UK’s largest pay-TV network, Sky plc, agreed a deal that will see Fox take over Sky for $14.6bn.

Under the terms of the acquisition, a recommended pre-conditional cash offer by Fox for the fully diluted share capital of Sky which Fox and its affiliates do not already own, Sky shareholders will be entitled to receive £10.75 in cash for each Sky share.

Fox, the world’s premier portfolio of cable, broadcast, film, pay TV and satellite assets spanning six continents across the globe, reaches more than 1.8 billion subscribers in approximately 50 local languages every day. Fox is also home to a global portfolio of cable and broadcasting networks and properties.

To provide financing for the acquisition, Fox and its 100 percent owned subsidiary 21st Century Fox America, Inc. entered into a bridge credit agreement with Goldman Sachs Bank USA, Deutsche Bank Securities Inc. and JPMorgan Chase Bank, N.A., as joint lead arrangers and joint bookrunners. The bridge credit agreement provides for borrowings of up to £12.2bn.

“As the founding shareholder of Sky, we are proud to have participated in its growth and development,” said a Fox spokesperson. “The strategic rationale for this combination is clear. It creates a global leader in content creation and distribution, enhances our sports and entertainment scale, and gives us unique and leading direct-to-consumer capabilities and technologies. It adds the strength of the Sky brand to our portfolio, including the Fox, National Geographic and Star brands.”

Europe’s leading entertainment company, Sky serves approximately 22 million customers across five countries: Italy, Germany, Austria, the UK and Ireland. With annual revenues of approximately £12bn, Sky is Europe’s leading investor in television content with a combined programming budget of over £5bn. In addition, Sky employs more than 30,000 people and supports an estimated 130,000 jobs across Europe.

The Fox spokesperson continued: “Sky is a creative, commercial, and consumer powerhouse delivering its own content to customers across all platforms. Sky is the number one pay-TV brand in all its key markets, with an exciting growth runway in each. The enhanced capabilities of the combined company will be underpinned by a more geographically diverse and stable revenue base. It will also create an improved balance between subscription, affiliate fee, advertising and content revenues.”

An attempt in 2011 by Rupert Murdoch (both chief executive of Fox and chairman of Sky) to buy Sky through his News Corp business collapsed due to a phone hacking scandal (which led to the closure of the News of the World newspaper, among other things) and political concerns that the deal would give Mr Murdoch too much power and influence over the UK’s media should it go ahead.

Fox’s acquisition of Sky is subject to a number of preconditions and conditions in accordance with Rule 2.7 of the UK City Code on Takeovers and Mergers, including the receipt of regulatory approvals and the approval of Sky’s shareholders. Moreover, the independent committee of Sky intends to recommend unanimously that unaffiliated Sky shareholders vote in favour of the acquisition.

Although 21st Century Fox currently anticipates that the acquisition will complete before the end of 2017, under the terms of the deal, if the effective date (as defined in the UK announcement) has not occurred on or before 31 December 2017, Sky shareholders shall be entitled to receive a special dividend of 10 pence per Sky share, payable in 2018.

“This combination creates an agile organisation that is equipped to better succeed in a global market,” concluded the Fox spokesperson.

Fraser Tennant