Sky PLC (LON:SKY) is ‘materially undervalued’ whether or not Rupert Murdoch’s £11.7bn bid to take full control of the satellite broadcaster goes ahead, according to research firm Jefferies.
It points out that the shares are currently trading around 10% below the price offered by Murdoch’s 21st Century Fox, suggesting the deal might fail.
Potential intervention by the Competition and Markets Authority (CMA) has been over-egged, Jefferies reckons.
And it thinks independent investors may even have some leverage to extract a better offer from the media baron.
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On the off-chance the takeover founders, the commercial case for a stand-alone Sky still stacks up, the American outfit said in a note to clients.
A slowdown in growth noted recently is the result not of structural problems in the company’s home market, but ‘limited commercial effort’.
The business should receive from a useful boost from the Wholesale Local Access (WLA) settlement set to be imposed on BT by the telecoms regulator, the research firm said.
Upgrading its recommendation to ‘buy’ from ‘hold’, Jefferies lifted its valuation of shares in Sky to £12 a pop from £10.50.
“Sky is trading 9-10% below the FOX offer recommended last December,” said Jefferies.
“Whilst this suggests risk of deal failure, we believe UK approval prospects are favourable given the principles established in previous reviews.
“Standalone, Sky’s prospects have been enhanced by WLA proposals and BT/Virgin travails.”
Of the 16 analysts logged as following Sky by the Brokerforecasts site, nine are in the ‘buy’ camp, while there are only one with a ‘sell’ recommendation. The remainder think the shares are fully valued.
At 10am, the shares were changing hands for 982p, little changed from Tuesday’s close.