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UK government approves Fox's takeover of Sky as long as it agrees to sell off Sky News

Culture secretary Matt Hancock also told MPs he won't be intervening in a rival offer from US media giant Comcast

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Matt Hancock hopes to have the process wrapped up within a month

The UK government has approved 21st Century Fox Inc’s (NASDAQ:FOXA) £19bn takeover offer for Sky PLC (LON:SKY), as long as Sky News is sold off to a “suitable third party”.

Rupert Murdoch-owned Fox launched its 1,075p a share bid for the 61% of Sky it doesn’t already own back in December 2016, since when it has been scrutinised by both Ofcom and the Competition and Markets Authority.

READ: Sky rockets as Murdoch attempts homecoming

Culture secretary Matt Hancock, who has been reviewing the deal on the grounds of media plurality and broadcasting standards, told MPs today he agreed with the CMA’s report that the Murdoch family would have too much influence over the UK news agenda should the deal go ahead as initially suggested.

Fox previously put forward a remedy to this issue, telling regulators it would sell off Sky News to a third party, possibly Disney. Hancock agreed that this would be the “most proportionate and effective” option.

“As a result, I have asked my officials to begin immediate discussions with the parties to finalise the details with a view to agreeing an acceptable form of the remedy, so we can all be confident Sky News can be divested in a way that works for the long-term,” Hancock said.

He added that he hoped to have the process wrapped up within the next month.

Comcast proposal waved through

Should Fox and the government not be able to agree on the required remedy, Hancock said he would be forced to reject the bid outright, although he conceded this was not his “preferred approach”.

As had been expected, Hancock also gave his backing to a rival £22bn offer from Comcast Corporation (NASDAQ:CMCSA) given the US telecoms giant’s relatively small presence in the UK.

READ: Sky gets surprise £22bn offer from Comcast

“I have concluded that the proposed [Comcast-Sky] merger does not raise public interest concerns and so I will not be intervening,” Hancock said.

Comcast, which owns CNBC, NBC Universal and Universal Pictures, had already promised to keep Sky’s headquarters in London and guarantee the editorial independence and funding of Sky News for at least 10 years. It also said it would not look to buy a majority interest in any UK newspaper for at least five years.

What now?

The approval of both deals sets up the prospect of a bidding war for Sky, although the share price will tell you that the market has been expecting this for a little while.

Fox’s offer is for 1,075p a share, while Comcast’s improved offer values each Sky share at 1,250p.

With the current share price at just over 1,350p, shareholders are betting that more bids will be forthcoming.

Complicating things is a separate deal between Fox and The Walt Disney Company (NYSE:DIS), currently being scrutinised by competition regulators in the US.

Disney has agreed to pay just over US$50bn in stock to snap up Fox’s entertainment assets, which includes the 39% stake in Sky. Meanwhile, Comcast has also stated that it is in the advanced stages of preparing a superior bid for the same assets, although no offer has so far emerged.

In short, regardless of which company is successful with its offer, Sky is unlikely to wind up as a part of Fox once the dust has settled.

Sky shares nudged 0.4% higher to 1,356p in late afternoon trade in London.

In a statement responding to the announcement, the satellite broadcaster said: “The Independent Directors of Sky are mindful of their fiduciary duties and remain focused on maximising value for Sky shareholders.”

 -- Adds Sky statement --

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