Rupert Murdoch's News Corporation has held a series of early-stage talks with BSkyB shareholders about the media conglomerate’s £7.8 billion initial approach to the UK satellite broadcaster.
News Corp's advisers told investors to put discussions about price on hold until after regulatory clearance had been granted. New Corp’s indicative offer was formally rejected on Tuesday, with independent directors of British Sky Broadcasting (BSkyB) telling Murdoch he must raise his terms by at least £1 billion. However, it is thought that some investors have been showing support.
Investors in BSkyB include Blackrock, the US value investor Brandes and the UK’s Odey Asset Management.
News Corp already owns 39 per cent of BSkyB.
On making the indicative offer, Chase Carey, deputy chairman, president and COO of News Corp, commented: “We are proud of the success BSkyB has achieved over the years and of the many innovations it has brought to consumers in the UK and Ireland. That success is reflected in its strong public market valuation.”
He went on to say: “We believe that this is the right time for BSkyB to become a wholly-owned part of News Corporation with its greater scale and broader geographic reach. For News Corporation, our Proposal presents an opportunity to consolidate a core business with which we have been closely associated for over two decades.
"News Corporation will also benefit from increasing the geographic diversification of our earnings base, reducing our exposure to cyclical advertising revenues and increasing our direct consumer subscription revenues.”
He concluded: “It goes without saying that we are a committed shareholder and are fully supportive of the talented management team and exceptional people at the company.”
On rejecting the offer, Nicholas Ferguson, BSkyB’s senior independent non-executive director, said: “Based on careful review and advice, it is the unanimous view of the independent directors that there is a significant gap between the proposal from News Corporation and the value of the company. We believe the company has a track record of very strong performance and excellent growth prospects.”
He concluded: “The independent directors remain fully committed to acting in the interests of all shareholders and will continue to meet on a regular basis.”
The main hurdle to any takeover in terms of regulation is likely to be the European Competition Commission. News Corp is currently preparing a submission that is expected to be filed in the next month. Some analysts are suggesting that the regulatory process to decide a formal offer price could take between nine months and a year.
The bid is said to be a first step by Rupert Murdoch towards consolidating his European broadcasting assets. The move would also lift News Corp’s exposure to non-advertising dependent businesses and allow it to consolidate BSkyB's cash flows as they are set to rise.
News Corp would fund the deal with a £2.7 billion loan and a further £5.4 billion from its own resources.
As of 31 March 2010, BSkyB had 9,770,000 customers and employed 16,000 people. It had profits of £780 million from revenues of £5.3 billion.
