Sky News could be sold to Walt Disney Co (NYSE:DIS) or ringfenced under proposals by 21st Century Fox (NASDAQ:FOXA) as a way to gain regulatory approval for its takeover of Sky PLC (LON:SKY).
Fox wants to buy the 61% of Sky it does not already own for £11.7bn but the UK Competition and Markets Authority has raised concerns that a deal would give the Murdoch family too much influence over public opinion and political agenda.
In a bid to alleviate the CMA’s concerns, Fox has recommended either a legal separation and ringfencing of Sky News or selling the news outlet to Disney.
READ: Walt Disney confirms deal to buy most of 21st Century Fox's assets
Disney would buy Sky News regardless of whether its proposed acquisition of Fox’s assets proceeds.
In December, Disney agreed to buy the bulk of Fox’s assets, including its film and television studios, for US$52.4bn.
Fox proposals should address CMA concerns, says Sky
In a statement on Tuesday, Sky said it believes that the two remedy proposals brought forward by Fox to the CMA “comprehensively address” any concerns the watchdog may have and “would guarantee the long-term future of Sky News and its ongoing editorial independence”.
“As the regulatory process remains ongoing, shareholders are advised to take no action at this stage,” the company said.
Fox said it has “worked diligently” with the CMA throughout the regulator’s review of the deal.
The company said it thinks the "enhanced firewall remedies we proposed to safeguard the editorial independence of Sky News addressed comprehensively and constructively the CMA's provisional concerns".
Fox accuses MPs of 'fanciful assertions' against Sky deal
Fox also hit back at MPs opposed to the proposed takeover, accusing them of seeking to influence the CMA and making a “number of unsupported and fanciful assertions”.
“If the CMA were to accept at face value these assertions and be dissatisfied with enhanced remedies that are a direct and reasonable response to concerns it had raised with us, we believe that this would compromise the integrity of a system which is supposed to be objective, evidenced-based and grounded on the application of established legal principles,” Fox said.
The CMA in January said it had provisionally found that Fox taking full ownership of Sky is not in the public interest due to media plurality concerns.
Murdoch's Sky bid against public interest, competition authority rules provisionally
The watchdog investigated the proposed deal over media plurality and commitment to broadcasting standards following a referral from the secretary of state for digital, culture, media and sport.
Liberum expects Fox to revise bid for Sky
Analysts at Liberum said they think Fox's proposed remedies should be enough to overcome the CMA's concerns on news plurality.
"More importantly, we think the news and today’s comments from Sky point to a revised bid from Fox/Disney to trump Comcast’s 1250p bid," they said.
In February, Comcast Corp. (NASDAQ:CMCSA) unveiled a possible £22.1bn (US$31bn) all-cash offer to buy Sky.
Liberum added: "The news that Sky Italia seems to have settled its long-running fight with Mediaset in the Italian pay-TV market also makes Sky more valuable to a bidder, given it makes the prospects in Italy more attractive."
Sky Italia and Mediaset announced a content and distribution deal on Friday, paving the way for a collaboration between the two media groups.
Liberum said the agreement suggests Mediaset is likely to exit its pay-TV business and sell its stake to Sky. This would make Sky effectively the sole major pay-TV platform in Italy, subject to regulatory approval.