Sky PLC (LON:SKY) shares fell following a report that 21st Century Fox has been holding talks to sell a large chunk of its assets to Walt Disney Co.
Rupert Murdoch recently held talks with Disney about selling Fox’s movie and TV production studio studios, cable networks FX and National Geographic and international assets such as the Star network in India and its stake in Sky, CNBC reported.
READ: Competition watchdog to look at Murdoch’s potential influence on Sky News as part of Sky-Fox merger probe
The news sent Sky’s shares down amid worries that it could scupper Fox’s plans to buy the remaining 61% of the UK broadcaster that it does not already own.
Culture Secretary Karen Bradley referred Fox’s proposed £11.7bn acquisition of Sky to Britain’s competition watchdog for a six-month investigation earlier this year after a three-month probe by Ofcom. The Competition Market Authority is examining the deal for media plurality and broadcasting standards.
Disney talks create uncertainty for Fox/Sky deal, says Liberum
Analysts at Liberum said the Disney talks “throw a curveball” into Fox’s planned takeover of Sky but it still sees a successful outcome of the bid.
“The news was seen to have two negative read-across points for the Sky bid, namely that (1) Fox may scrap its bid for Sky as part of the proposed sale of assets. CNBC stated that Sky had said it was prepared to walk away from the bid as part of any sale and (2) Fox’s willingness to consider including the Sky stake as part of the disposal assets is a signal that it feels less confident over gaining regulatory approval from the UK Government with the news that regulator Ofcom had stated the Fox News Channel had breached broadcasting standards adding further fuel to the fire,” Liberum said.
It added: “We still see a successful conclusion of the bid as the most likely conclusion, which means the shares offer significant upside, however we understand this news will cause further uncertainty. Reiterate Buy.”
Disney/Fox deal could strengthen the case for Sky takeover, says UBS
UBS also believes Fox will overcome regulatory hurdles in its bid to buy Sky. The bank argued that a combination of Disney and Fox content could strengthen the case for a Sky takeover.
Sky has been building a pan-European streaming platform with its Now TV and Sky Ticket products, and the addition of content from Disney as well as Fox would only make that more compelling, UBS said.
In the event the Fox/Sky deal is blocked, UBS thinks Disney could be a potential strategic bidder for Sky and it would not have same cross-media ownership issues as Fox’s bid.