There was more detail and reporting overnight on Rupert Murdoch’s almost $US12 billion attempt to take control of the 39% owned affiliate, BSkyB, in London. Sky’s independent directors did tell the Rupster to go away and come back with an offer above 800p a share, 100p more than News has offered.
News Corp shares rose 9% in New York, BSkyB shares rose 16% in London
Rupe and son James, who chairs BSkyB and is the apple of dad’s inheritance eye, it seems, are nowhere to be seen in this deal, at least publicly.
They were not involved in a briefing with US investors last night or in the London talks, even though the Rupster is said to be in London (no doubt chatting to the new government about all the wonderful publicity for the May 6 poll).
News told US investors it’s looking to borrow about $US4 billion to go with its $US8.2 billion in existing cash to finance the bid for the 61% it doesn’t own. It won’t issue new shares (a recognition that BSkyB investors don’t want the non-voting funny shares and would only want the A-class voting stock, which Rupert believes is his and his alone. OK, he does share it with other holders).
The bid documents contain the revelation that the agreement to talk between Sky’s independent directors and News Corp will expire on December 31, 2011. That’s not talking, that’s boring, but it’s also recognition of what looks like being a lengthy approval process, should the bid proceed. But first Rupert has to come up with that 800p or more a share.
And it’s the approval process that News is trying to cynically limit in the UK with what is already a controversial deal.
News is proposing to seek European Commission clearance first. The idea is that EC approval might make UK approval a lot easier. But the Europeans often flick the approval back to the member country when the EC involvement is less than at the member state level.
News has less concentrated interests in non-UK Europe; it has the satellite pay-TV businesses, the partly owned Sky Germany and the wholly owned Sky Italia. Sky broadcasts into parts of mainland Europe, and of course covers Ireland, which is a non-UK EC market. But the competition issues are in the UK, even though with 39%, Murdoch and News are deemed to already control BSkyB.
Regardless of that position, there’s that visceral reaction to every deal the old “Dirty Digger” does in Britain that draws calls for it to be blocked, delayed, or at least examined in the hope News might go away or be defeated by process.
In its briefings overnight, News said that at 700p the acquisition would add to cash flow and profits, but the company confirmed that BSkyB’s earnings cannot be repatriated to the US without incurring tax in the UK.
That naturally now has analysts fancying a bit more work for their corporate departments by speculating that BSkyB and News International (the UK newspapers) will be lumped together and to continue expanding. A bid for the rest of Sky Germany perhaps, to go with Sky Italia and Sky in the UK to form a pan-European broadcast platform?
The independent directors of Sky include Allan Leighton (a former UK retailer), Andrew Higginson (another former retailer), Jac Nasser (BHP Billiton chairman) and David Evans, the former Fairfax Media director who was forced off the Fairfax board because of this link. A non-independent director is Tom Mockridge, who is presently running Sky Italia and has come a long way from the days as a humble finance/political reporter on the Sydney Morning Herald and then Paul Keating’s press minder.
And finally, for all the scheming and finessing by News and the Murdochs, the whole deal might come down to one single approval in London.
According to a UK brokers report on the Financial Times Alphaville website, UK Secretary of State for Business Vince Cable, who is a Liberal Democrat, can block a deal by himself. The Murdoch London papers supported the Conservatives in the May 6 poll, not the Liberal Democrats, which they tried to undermine when it looked as though they could do very well in the election.
The Lib Dems are no lovers of the Murdochs or the News media in the UK.
Cable is respected in the UK because he was the one person in any position of authority who warned that there was a financial and housing crisis approaching, well before anyone else warned of it. He was the Lib Dems shadow chancellor at the time. That has given him far more clout that any other economic minister in the new government. Will he use it if he has to in this case?
It will be the most important media decision this government will make, short of ending the TV licence that supports the BBC.