Analysis: Government clears way for Sky bidding war

The initial Murdoch-Disney musings came over a glass of wine – it might now be wise for Disney and Comcast to have a drink together before a bidding war intensifies, writes Raymond Snoddy

The debate over the future of Sky News is a bit like medieval arguments over transubstantiation or angels on pinheads.

There is not much happening in reality and certainly there is very little substance except perhaps for a predictable piece of political expediency.

Culture Secretary Matt Hancock was able to sound tough in the House of Commons by backing the verdict of the Competition and Markets Authority that Sky News had to be sold to allow the Murdoch acquisition of all of Sky to go ahead.

The Murdoch family now has essentially 15 days to come up with an acceptable scheme to sell Sky News to Disney or another suitable company, such as Comcast, perhaps.

If such a thing were to happen then all plurality issues would fall away and the phoney war would be over and the real action can get under way in the three-way bidding battle.

At the political level it worked. After more than 14 months of headlines and countless millions in legal and adviser fees, Hancock had done something – and Tom Watson, the anti-Murdoch campaigner, was left merely confused, as indeed any sensible person might be.

It also had the desired effect of relegating the story to the City pages and defusing any row over Murdoch, although understandably Sky News gave plenty of attention to the story.

The insistence that Sky News has to be sold to Disney – or someone else – and that it should be funded for at least 10 years, was pure window dressing.
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Sky has already agreed to sell Sky News to Disney and guarantee its future funding. And then again the Disney bid for most of Murdoch’s entertainment assets, including Sky, would mean that Sky News would anyway, as a result, be owned by Disney.

If Comcast prevails, and it too was cleared in passing by the Culture Secretary, then Sky News would yet again pass out of Murdoch ownership and similar financial provisions have already been offered.

If there is any sense at all in this stately dance it can only be to formalise the financial provisions designed to protect the survival of the loss-making channel.

It may be unlikely to happen in the real world, but Disney could grow cool on the Fox deal and Comcast change its mind or decide the price is too high.

Murdoch would then own all of Sky, provided he sold Sky News to someone who would no longer want it.

It is worth saying one last time that all of this debate over plurality and the over-weaning media influence of the Murdoch family totally lacks substance in the current media climate.

There is no evidence that Rupert Murdoch or his son James have ever influenced the editorial agenda of Sky News over the years, nor are there plausible commercial reasons why they would want to do so in future. Should it happen, there are well-established Ofcom rules on impartiality to cope with any such outcome.

Then there are the Murdoch national newspapers which, historically and quite correctly, face no legal checks on partiality.

As a digital specialist Matt Hancock knows better than most the real challenge is not about trying to curb excessive newspaper power whether exercised by Murdoch or anyone else.

In present days it is much more about encouraging companies, or rich individuals, to find a way to continue funding teams of independent journalists, as advertising continues to leak away to the internet.

Hancock obviously knows all of this. After all he has set up an inquiry into the sustainability of the local and regional press.

The Culture Secretary is also certainly aware that the greatest hit to a plurality of views in the UK would come if Sky News went down and the BBC was left with a monopoly of 24-hour television news.

At least now we can move out of the medieval phase of the debate and into what could be a bloody bidding war, particularly of the Sky group’s European assets, as Amazon, Apple and just about everyone else in the Silicon Valley world lust after the entertainment dollars.

The outcome will come down to who blinks first over price and the biggest winners are likely to be Sky shareholders.

All the signs are that the independent Sky directors have a firm grasp of their fiduciary duty and will avoid any sense of a sweetheart deal with the Murdoch family.

So you have Murdoch bidding for Sky and Disney bidding for Murdoch assets including Sky, and Comcast, which may also bid for the Fox entertainment assets as well as Sky. There could even be someone else biding their time watching for a moment of maximum chaos.

Understandably the markets smell money and are building in higher share prices in expectation, almost certainly correct, of further bids.

The simplest, if faintly daft scenario, is that Murdoch now sells Sky News to Disney, owners of ABC News and then completes the purchase of the 61 per cent of the shares he does not already own. Valuation of those shares could be tricky. How large a premium do you build in to reflect what might subsequently happen so that it is the current Sky shareholders who benefit to a reasonable degree and not just Murdoch sitting on 100 per cent of Sky.

If that initial deal goes through, then the original agreed Disney agreement could advance, albeit it at a higher price.

Comcast, which owns NBC News, is unlikely to let that happen and will surely intervene.

The initial Murdoch-Disney musings came over a glass or two of wine. It might be wise for Disney and Comcast to sit down for a glass or two to carve up the main body of the Murdoch business before the bidding war intensifies.

Disney would not sniff at the Murdoch US assets on sale and Comcast could get what it most wants: a significant European foothold.

Before things get messy Sky independent directors might consider setting up a blind three-way auction for 61 per cent of Sky to maximise value.

At least the medieval phase of plurality arguments conducted in a narrow and out-dated UK domestic framework may mercifully soon be over and the debate can begin on far more serious matters.