The bid by Rupert Murdoch's 21st Century Fox to take over Sky has been referred to regulators by the culture secretary.
Karen Bradley confirmed her decision this morning after already announcing she was “minded” to do so.
Broadcast regulator Ofcom will examine “public interest considerations” and the Competition and Markets Authority (CMA) “jurisdiction issues”.
Issues around media plurality, broadcasting standards and whether the new owner is fit and proper are to be investigated by Ofcom, while the CMA is expected to oversee the process.
Fox said it was confident the deal would be given the green light and analysts were also bullish. However, a legal source familiar with the deal suggested the companies may need to offer remedies to satisfy concerns over media plurality.
The regulators will be required to report back for the Department for Culture, Media and Sport within 40 working days.
Fox said in a statement:
We are confident that a thorough review of our track record over 30 years will underscore our commitment to upholding high broadcast standards, and will demonstrate that the transaction will not result in there being insufficient plurality in the UK.
The media market has changed dramatically in recent years, as has our business. We believe our proposed £11.7bn investment will benefit the UK’s creative industries. We look forward to continuing to work with all stakeholders and are confident that the transaction will be approved.
Fox wrote to Bradley last week telling her the deal was “in the interest of the UK, its creative economy and its consumers”.
Fox agreed an £11.7bn deal to acquire the 61 per cent of Sky it does not already own in December.
Murdoch’s News Corporation attempted to take full control of Sky, then called BSkyB, in 2010 but abandoned the bid in 2011. This withdrawal came amid political pressure at the height of the phone-hacking scandal at the News of the World, which was owned by News Corporation’s News International, which has since been renamed News UK.
Since that bid fell through, News Corporation has split into two companies: a new News Corporation, which still owns British newspaper publisher News UK, and entertainment business 21st Century Fox.
What the analysts say
Analysts spoken to by City A.M. yesterday also suggested the probes were unlikely to cause much trouble for Fox and Sky.
Ian Whittaker, a media analyst at Liberum, also questioned the political drive to block the deal this time around.
“If you're Theresa May's government, why would you look to block Fox?” Whittaker said.
It’s a sign of major investment within the UK. And they also have influence over newspapers, which of course you would want to keep onside as well.
There’s not the same flaw as there was [before], with the whole the phone hacking thing. From the competition standpoint, there’s more separation between Fox and newspapers than there was six years ago.
Berenberg’s Sarah Simon also believes the deal is likely to go through and that there is a reasonable chance they would not need to make concessions.
But she added: “The fit and proper test, which is more touchy-feely, is the bigger hurdle, rather than news plurality.”
A number of politicians and groups have opposed the deal, however. The National Union of Journalists, Trade Union Congress and International Federation of Journalists today issued a statement speaking out against the deal, claiming it would harm “news plurality”.
Seamus Dooley, NUJ acting general secretary, said:
The determination of the Murdochs to extend their power, wealth and influence knows no bounds.
The need for media plurality is recognised in the European Charter of Fundamental Rights and in that context the European Commission has a direct role in examining the proposed merger.