Rupert Murdoch is set to finally be given clearance by the government to take over Sky, freeing the media mogul to lodge a new knockout bid to try to see off rival Comcast.
The culture secretary, Matt Hancock, will this week give his verdict, allowing Murdoch to buy the 61% of Sky he does not already own after a consultation on plans to make him sell Sky News to reduce his control of UK news media.
Murdoch must also top up any potential shortfall in funding by Sky News’s new owner, most likely Disney, to keep its budget at £100m for the next 15 years.
Hancock has been examining submissions to the final consultation, which closed last Wednesday. If another, new, viable remedy that should have been considered is raised that could result in a short delay to his final decision.
However, the government has followed an exhaustive 18-month process involving investigations by Ofcom and the Competition Markets Authority, and observers believe it is unlikely that a new remedy that should be considered would emerge now.
In April, Sky’s independent committee withdrew its recommendation that shareholders accept Murdoch’s offer after the US cable giant Comcast lodged a £12.50-a-share cash bid valuing Sky at £22bn.
“My expectation would be that as soon as approval comes through within a few days there will be a revised bid for Sky by Fox,” one City source said. “The question is how high. If I’m Fox I’d table £15 a share.”
A bid of that level would value Sky at almost £26bn, with Murdoch paying £15.3bn for the 61% he does not already own. The prospect of a bidding war with Comcast has analysts predicting that it could take more than £16 a share to win, valuing Sky at £27.5bn.
Comcast has until the end of this week to formally make its £22bn offer to Sky’s shareholders. If the government and then Murdoch move quickly enough this week, Comcast will be forced to rethink its plans.
The battle for Sky is playing out against a much larger fight between Disney and Comcast to take over most of 21st Century Fox, which owns 39% of Sky as well as assets including the Hollywood studio behind films from Deadpool to X-Men.
Last month, Disney, which has offered to buy Sky News from Murdoch to help him secure clearance to buy Sky, upped its offer for Fox to $71.3bn ($38 a share). Earlier in the month, Comcast had trumped Disney’s first offer for Fox ($28; $55.4bn) with a $65bn, or $35 a share, bid.
The spiralling price tag on Fox has significant ramifications on the price that will be paid to win the separate battle for Sky.
In April, the UK Takeover Panel ruled that if Disney successfully takes over Fox before Murdoch, Comcast or another bidder has taken full control of Sky then it will be forced to buy out the 61% of the satellite group it does not own.
The panel ruled that Disney would have to buy the stake at £10.75 a share – the now 18-month-old bid price tabled by Murdoch.
This “chain principle” is designed to make sure minority shareholders are treated fairly; in this case to ensure Sky’s minority shareholders receive the same amount as 21st Century Fox.
The rule would also apply to Comcast if it beats Disney in agreeing a deal to buy Fox.
However, after Disney significantly upped its bid for Fox, the UK Takeover Panel is looking at whether it should be forced to pay a much higher price. Disney’s new bid for Fox is 36% higher than its original one, which has led analysts to suggest that premium could be extended to Sky to make Disney pay at least £14.62 a share.
The battle for Sky should be over in September, with either Fox or Comcast the winner – unless a surprise new bidder emerges. This means it is highly unlikely that whoever is ultimately victorious in the hunt for Fox – Disney or Comcast – will find itself having to make a move for an unsold part of Sky when the deal completes in the US next year.
However, the Takeover Panel ruling, which could be announced this week, will nevertheless set a bidding price floor in the battle for Sky.