Not all of News Corp’s shareholders jumped with joy at news of controlling shareholder Rupert Murdoch's plan to buy the 61 per cent of BSkyB’s shares it doesn’t already own.
Some may feel it is a convoluted attempt to serve Murdoch interests rather than those of the minority holders in News Corp. Others may think it is an unexciting move to buy more of something the group already controls. Others may have wanted a return of capital.
But there are surely merits in doing a deal, if it can be done at a sensible price of up to around 800p a share and preferably at no more than 740p. Sky’s profits are predicted to rise from £638m to £1.1bn over the next two years and by buying the company outright News Corp gains access to free cash flow. BarCap says the deal would give News Corp a more reliable subscription earnings stream which could be priced at a higher multiple than the group’s entirely ad supported businesses.
It is the strategic nature of the deal that should do it for News Corp shareholders, though.
It is true that few media groups fully utilise the synergies between their different platforms. But News Corp has always excelled. Look how its UK newspapers, including the Sun, Times and Sunday Times, have reported on Premier League football as if it were a soap opera – only for millions of subscribers to buy into the live coverage on Sky’s sports channels. Also, as News Corp begins to impose a paywall to its Times and Sunday Times web-sites, full integration between News Corp and Sky will surely lead to ever more enticing bundling packages for pay tv, broadband, the web offering and phone.
Furthermore, where once there might have been political concern at the prospect of News Corp and Sky merging, there now seems a quiet acceptance the deal will go through even if there may be some hurdles along the way.