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Murdoch's bid to buy Sky to be referred to UK competition regulator by culture secretary

Culture Secretary Karen Bradley said there are concerns about compliance procedures at Fox News and corporate governance at Rupert Murdoch's companies
Sky
Fox wants to take full control of Sky

21st Century Fox’s planned takeover of Sky PLC (LON:SKY) faces a six-month investigation after the culture secretary said she was minded to refer the deal to the UK competition watchdog,

Karen Bradley told MPs concerns about media plurality and broadcasting standards mean the £11.7bn deal needs further examination by the Competition and Markets Authority (CMA).

READ: Sky shares fall as Murdoch’s takeover bid delayed once again

"I have the power to make a reference if I believe there is a risk - which is not purely fanciful - that the merger might operate against the specified public interests," she said.

Rupert Murdoch’s Fox, which owns 39% of Sky, wants to buy the shares it does not already own.

But media regulator Ofcom has raised concerns that the takeover would give the Murdoch family too much power over Britain’s media.

Following Ofcom’s assessment, Bradley had in June said she would look to refer the deal to the CMA on media plurality but not broadcasting standards.

READ: Sky and 21st Century Fox slam culture secretary over delay to proposed takeover deal

Concerns about broadcasting standards

Since then, however, there have been calls by campaign group Avaaz and a group of high-profile MPs led by Ed Miliband to refer the takeover on the grounds of broadcasting standards.

The CMA would have up to six months to review the deal.  

"Before I come to a final decision, I am required - under the Enterprise Act 2002 - to allow the parties to make representations on my proposed decision, and this is the reason my decision at this stage remains a minded-to one,” Bradley said.

"I have given the parties 10 working days to respond. Following receipt of any representations from the parties, I will aim to come to my final decision in relation to both grounds as promptly as I can."

Shares in Sky fell 1.78% to 935.590p in afternoon trading. 

Decision long overdue, says analyst

David Cheetham, chief market analyst at CMC Markets, said today's decision is long overdue. An announcement was initially expected back in April before being postponed due to the calling of a snap UK general election.

"In all honesty, there always had been a degree of strong hesitation amongst shareholders that this deal was unlikely to go through without any hiccups given the history and so todays news is perhaps confirmation they were right to suspect a delay," said Cheetham. 

He added: "The deal is priced at 1.075p per share and with sky having now fallen to the low 900s there is clearly some considerable doubt as to whether it will in fact go ahead."

"Having said that, the share price remains well above the level traded before the takeover was announced last December with the stock seeing a rapid rise of around 25% in the days that followed from below 800p."

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