Monday 24 September 2018

Fox may be forced to pay more for Sky after football deal winner

Alexis Sanchez and Paul Pogba
Alexis Sanchez and Paul Pogba

Paul Sandle

Sky has tightened its grip on English Premier League football rights at a lower price than it currently pays, fuelling speculation that Twenty-First Century Fox could now be forced to pay more to buy the broadcaster.

The positive result for Rupert Murdoch's European pay-TV company could strengthen the hand of shareholders who want Fox to raise its offer to buy the 61pc of the group it does not already own.

Walt Disney also had an interest in the outcome because if its $52bn (€41.6bn) deal to buy Fox assets is cleared, it will end up owning either all of Sky, or the 39pc stake that Fox currently holds.

Shares in Sky rose 3.5pc to a two-year high of £10.98, exceeding the £10.75 per share that Fox agreed to pay for the group in December 2016.

Analysts at Jefferies said Sky, which has used Premier League football to help build its pay TV business over more than two decades, had emerged as the winner in the auction for domestic TV rights from 2019-22.

Retaining the bulk of English Premier League rights was key for Sky to maintain its premium position, but to do so and secure a lower outlay is a bonus," they said.

Some investors had already argued that Sky should fetch a higher price after Disney agreed to buy Fox's film, television studios and other assets at a price which they said represented a higher multiple than Fox agreed for Sky.

Hedge fund manager Crispin Odey, who has a stake in Sky, has long argued that Fox should be stumping up more.

"It looks like they're not going to get it at the original price," he told Reuters.

"Our view is they won't get it for less than £13.40."

Of the seven packages of matches on offer for three seasons from August 2019, Sky won four for a total outlay of £3.58bn, while BT will pay £885m for its one package.

Sky said it was spending 16pc less per game than under its present three-year deal. Two of the seven packages, both of which involved rights to simultaneous screening of a block of matches, remained unsold at this point, indicating that the Premier League had not met its reserve price.

Analyst Polo Tang at UBS, who forecast no rise in the price Sky would pay when most were expecting a 20-30pc jump, had said a good result would suggest scope for a higher Fox offer.

He said in theory the outcome would lead to a £500m boost to the consensus for £1.7bn earnings in the 2020 financial year.

Comcast is also considering an intervention in the Disney deal and making a competing offer for the Fox assets, Reuters reported.

Such a move could further stoke expectations that Sky is worth more than Fox has agreed to pay.

"There's a lot going on now," Odey said of Comcast's potential interest.

Like Odey, hedge fund Polygon has questioned the price that Fox has offered and said in December that it thought Sky was worth more than £13 a share.

"We believe Sky will likely use some of this headroom to invest more in original programming," he said. "(But) materially higher levels of profitability at Sky could lead to shareholders seeking a higher offer price from Fox."

Elliott, the US hedge fund best-known for its activist campaigns at companies, including forcing bidders to pay more during takeovers, has also been stakebuilding in Sky recently. (Reuters)

Irish Independent

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