Fox sticks with £14 a share for Sky but switches to public offer

21^st Century Fox has posted its £14 a share offer for the 61% of Sky it does not already own to shareholders without topping Comcast’s superior offer of £14.75 a share, potentially postponing the day when the UK pay TV operator’s fate will be decided.

Fox had until this Friday to decide how to respond to Comcast’s £26 billion (€29 billion) offer for the pay TV giant, with the option of topping Comcast’s bid, giving up the battle or formally making its existing, inferior bid, kicking off a new bidding period for the operator with a deadline of September 22.

Under the terms of its US$71 billion (€61 billion) deal with Disney, which is acquiring the bulk of Fox’s entertainment assets including Sky, Fox had to consult with the US entertainment giant before making its next move.

It now appears that Fox and Disney have decided to play a waiting game. The offer of £14 a share gives the pair time to decide whether to top Comcast’s offer, which has been recommended to Sky shareholders by the company’s independent committee, or to fold.

In its offer document, Fox said it intended to implement the acquisition by way of a public takeover offer within the meaning of part 28 of the 2006 Companies Act rather a scheme of arrangement in accordance with part 26 of the act, as it had proposed previously.

Sky said that the acquisition is conditional on acceptances representing 75% or more of the Sky shares not controlled by Fox, but the company has reserved the right to reduce this acceptance condition to a level that could be as little as a simple majority of all Sky shares, including those it already holds.

The change from part 26 to part 28 means that the takeover no longer needs to be approved by 75% of Sky’s shareholders other than Fox, as was previously the case with the scheme of arrangement, where the takeover process is ‘controlled’ by the target company. In the case of an offer, a 50% threshold of all shareholders is sufficient – a much lower threshold.

One key difference however is that, with a scheme, once the 75% threshold has been met, the acquiring company automatically obtains all the shares of the target. In the case of its public offer being accepted, Fox would have to obtain acceptance by over 90% of shareholders to then proceed with a squeeze-out to obtain all the shares.

While it puts the company on a more equal footing with Comcast in the battle, the risk for Fox under the new procedure is that it could be left with minority shareholders that do not want to sell, meaning it could potentially be prevented from delisting Sky and reaping the financial benefits of doing so.

Sky’s independent committee noted the publication of Fox’s offer document. “Following the publication of the recommended offer document by Comcast on 13 July 2018, and today’s publication by 21CF, both the offers made by Comcast and 21CF have now been put to Sky shareholders,” Sky said.

Speaking to analysts after Disney posted its Q3 results, CEO Bob Iger noted that “our consent is required for an increase in [Fox’s Sky] bid”. He added that, since the Sky situation was “fluid”, it would be inappropriate to comment further.