Rupert Murdoch’s 21st Century Fox confirmed it reached an agreement in principle to buy the 61% of British pay-TV firm Sky Plc it does not already own for around $14 billion.
21st Century Fox has always said its existing 39.1% stake in Sky “is not a natural end position.”
The proposed offer is for £10.75 per share in cash less the value of any dividends subsequently paid by Sky.
That represents a premium of 40% to Sky’s closing price on December 6, the last business day prior to the initial proposal from 21st Century Fox.
Sky shares rose about 27% to close around £10.
“However, certain material offer terms remain under discussion and the possible offer may or may not lead to an offer being made by 21st Century Fox,” said 21st Century Fox.
“There can be no certainty that any offer or transaction will proceed.”
Sky has formed an independent committee of the board to consider the terms of the proposal.
The committee comprises Sky’s deputy chairman Martin Gilbert — who is also Aberdeen Asset Management chief executive — as well as senior independent director Andrew Sukawaty, group CEO Jeremy Darroch, chief operating officer Andrew Griffith, and independent non-executive directors Tracy Clarke, Adine Grate, Matthieu Pigasse and Katrin Wehr-Seiter, each of whom the board “considers to be free from conflicts of interest with regard to the proposal.”
Gilbert told Reuters the offer was a good premium worth presenting to shareholders.
Analysts said 21st Century Fox saw an opportunity to bid as Sky’s share price fell about a third this year and the UK’s vote to leave the European Union caused sterling to fall about 14% against the US dollar.
A lower pound makes it cheaper for foreign firms to buy UK assets.
21st Century Fox said the proposed transaction “would bring together 21st Century Fox’s global content business with Sky’s world-class direct-to-consumer capabilities, which have made it the number one premium pay-TV provider in all its markets.
“It would also enhance Sky’s leading position in entertainment and sport, and reinforce the UK’s standing as a top global hub for content generation and technological innovation.”
Sky said its independent directors, who have received financial advice from Morgan Stanley, PJT Partners and Barclays, have indicated to 21st Century Fox that they are willing to recommend the proposal to Sky shareholders, “subject to reaching agreement on the other terms.”