Sky investors to play hard ball with Murdoch empire

Steve Dinneen
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BSKYB investors are preparing to play hardball with Rupert Murdoch’s News Corp over its proposed takeover.

Murdoch tabled £7.8bn in September to buy the 61 per cent of the broadcaster it does not already own but now investors are pushing for a price closer to £11bn.

Talks between the two sides were broken off while regulatory clearance was sought, with culture secretary Jeremy Hunt finally giving the bid the green light last week.

The Sky board had hinted it would accept a bid over 800p a share but the broadcaster has continued to strengthen its position since then, hitting its target of 10m subscribers and increasing its first half profits by 40 per cent year-on-year.

Now investors including Fidelity, which owns three per cent of Sky, and hedge fund boss Frank Brosens, who owns 1.18 per cent, are hoping to push the price as high as 950p a share.

BSkyB’s share price closed at 832p on Friday – a massive 45 per cent premium on its pre-bid closing price in June of just 574p.

News Corp’s hopes of keeping the deal price down were dealt a blow by an RBS note that said synergies could justify a bid over 900p a share.

Analyst Paul Gooden said: “We believe BSkyB’s stand-alone value is 840p, however a combined News Corp/BSkyB would enjoy synergies. The most significant would be through bundling, most obviously using digital newspapers to differentiate Sky Broadband. We believe they justify a 900p plus per share offer.”

Gooden believes this could leave News Corp with a 70 per cent stake, below the 75 per cent which could result in de-listing and below the 90 per cent needed to squeeze out remaining minorities.

Adding to the News Corp headache, analysts at Jefferies say the firm could have its credit rating cut if it is forced to bid more than 850p a share.

Standard & Poor’s said last year that a bid of 840p may have a negative impact on News Corp’s BBB+ rating, which the firm is desperate to maintain. Given higher earnings and a reduction in debt at both firms, Jefferies said this is now likely to stand closer to 850p.

News Corp, headed up in Europe by James Murdoch, pictured, avoided a lengthy Competition Commission probe into the bid after Hunt accepted a concession to spin-off Sky News into a separate, publicly-traded entity, in order to counter media plurality concerns.

Net profit at Sky hit £179m for its fiscal first half, compared to £128m the year before, buoyed by demand for its new hardware, including 70,000 people paying for its 3D services and 343,000 new HD users.

Customers were on average paying a record £541 a year. Only 9.5 per cent of them left on an annualised basis, which was also better than expected.