A 21st Century Fox takeover of broadcaster SKY PLC (LON:SKY) would be against the public interest, the UK competition authority has judged.
In a provisional ruling, the Competition and Markets Authority (CMA) objected to the deal on media plurality concerns, but not because of concerns over broadcasting standards in the UK.
The CMA said Rupert Murdoch and his family, who control Fox and News Corporation, would have too much control over news providers in the UK if Fox took over Sky and therefore too much influence over public opinion and the political agenda.
Disney agrees to buy Fox assets
Since Fox made its bid, however, Walt Disney has agreed to buy its interest in Sky, though this was not considered in making its provisional findings said the CMA, though the eventuality was allowed for in a number of remedies to solve the plurality concerns.
These include spinning off or divesting Sky News, ring-fencing it or an outright halt to the whole deal.
21st Century Fox owns 39% of Sky and launched its £11.7bn bid for the outstanding 61% it did not own in December 2016, five years after a similar attempt to take 100% control was knocked back by the regulator.
The bid was handed to the CMA for investigation in September.
Disney Corp’s agreed takeover of the majority of 21st Century Fox’s assets has further muddied the waters as it included Fox’s 39% stake in Sky.
Rupert Murdoch is said to have wanted to full ownership of Sky concluded before the Fox/Disney deal went ahead, with ownership of the broadcaster being transferred as part of the deal.
Final judgment expected in May
Interested parties will be able to comment on the remedies with the UK government now expected to receive the final judgment on May 1.
The CMA also cleared Fox following recent allegations of sexual harassment in the United States, which did not affect its broadcasting standards in Britain.
In a statement, Fox said it was disappointed by the decision, adding thought it would work with the CMA ahead of the final report in May.
The deal with Disney has to be approved by the US regulatory approval, which is expected to occur in the middle of 2019.
Media plurality key
Anne Lambert, chair of the CMA's independent investigation group, said: "Media plurality goes to the heart of our democratic process.
"It is very important that no group or individual should have too much control of our news media or too much power to affect the political agenda."
Broker Liberum suggested the tone in the regulator’s conclusions indicated a greater chance the deal would be blocked.
In particular, the broker highlighted the comment: “The CMA therefore takes the provisional view that prohibition of the Transaction would represent a comprehensive solution to all aspects of the provisional adverse public interest finding and that it poses relatively few risks, compared to other options, in terms of implementation or effectiveness.”
Shares in Sky rose 2.8% to 1,031p, compared to the 1,075p value of Fox’s bid.
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