News Corp. Offers to Buy Remaining BSkyB Stock
News Corp. is in talks with British Sky Broadcasting to acquire the 60.9 percent of BSkyB stock it doesn’t already own, the companies said Tuesday. News Corp. has already made two informal offers for the public shares, both of which were declined by BSkyB, they said. While the companies haven’t agreed on a price, they agreed to proceed with the regulatory process to “facilitate a proposed transaction,” said News Corp. BSkyB’s independent directors said it would back a higher offer. “It is the unanimous view from the independent directors that there is a significant gap between the proposal from News Corp. and the value of the company,” said BSkyB. The purchase likely will require regulatory approval from the European Union and other regulators, said News Corp.
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News Corp. offered to buy the remaining stock for $11.5 billion, paid for in cash and about $4 billion in new debt, the company said. Exactly which regulatory agencies will oversee the transaction remains unclear, said News Corp. executives. “We will make a submission to the European Union,” News Corp. President Chase Carey said during a call with analysts. “Beyond that we will engage with the appropriate regulatory authorities . I believe we should get through.” News Corp. executives declined to speculate on the process during the call. The company said approval would take at least about six months. If the deal is denied, News Corp. could owe up to $29.7 million for costs incurred under the agreement.
The added stake in BSkyB offers an expanded and diversified earnings base for News Corp., Carey said. The purchase will also increase direct subscription revenue and allow News Corp. to streamline its corporate structure. The increased stake is “an investment in the core business,” Carey said.
There’s a lot for News Corp. shareholders to like about the proposal, analyst Jason Bazinet of Citigroup, wrote investors. “Over the past few years, News Corp. has been cleaning up minority owned assets,” he said. “This is another move in that direction” and a big plus for the shares because so many investors weren’t comfortable valuing its 39 percent stake in BSkyB on their own, he said: “This will make the valuation calculus far easier for the buy side.” Financing costs are low now and investing in BSkyB is a far better use of News Corp.’s money than keeping the cash, Bazinet said. But getting regulatory approval could be a long process, he said. He expects it to take 12-18 months.