Share Name Share Symbol Market Type Share ISIN Share Description
Sky plc LSE:SKY London Ordinary Share GB0001411924 ORD 50P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  -3.00p -0.32% 921.00p 921.00p 921.50p 923.50p 918.00p 918.00p 925,749 14:11:26
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Media 12,916.0 803.0 40.6 22.7 15,832.15

U.K. Government Adds Another Obstacle to Fox's Pursuit of Sky -- Update

12/09/2017 7:24pm

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By Stu Woo 

LONDON -- The U.K. government referred 21st Century Fox Inc.'s $15.5-billion proposal to consolidate ownership of Sky PLC to British antitrust regulators and said it was likely to broaden that review to include Fox's commitment to the country's broadcasting standards.

British Culture Secretary Karen Bradley said Tuesday she was acting partly out of concern about corporate-governance at 21st Century Fox, highlighted by a series of sexual harassment scandals at its Fox News unit. She also said Fox was previously found not to have proper broadcast-compliance procedures in place related to transmissions of Fox News in the U.K., until regulators raised the issue. She said regulators may also want to review whether Fox is committed to British broadcasting standards, amid what third-party critics of the deal have said is Fox News' partisanship in the U.S.

The government's move to widen the scope of the review represents a new hurdle in media mogul Rupert Murdoch's yearslong bid to solidify control of British pay-TV giant Sky and further integrate his wider, global media empire. Sky shares fell more than 4% in London after the announcement, before recovering somewhat. Fox shares were trading down 0.8% in early New York trading.

"We are disappointed by this further delay and that the Secretary of State is now minded to refer the proposed acquisition to the CMA in relation to broadcasting standards despite Ofcom, as the independent broadcast regulator, maintaining its advice that there are not sufficient concerns to justify such a reference," a Sky spokesman said, adding that Sky would cooperate with Ms. Bradley.

21st Century Fox in a statement pointed out that they and Sky "have records of compliance consistent with other comparable license holders," and added it was "surprised" that Ms. Bradley was "still unable to form an opinion."

Ms. Bradley had previously said she was likely to refer the proposed merger to the country's Competitions and Markets Authority on so-called media plurality grounds. The deal had already passed muster with European Union antitrust regulators, but Ms. Bradley had raised questions about whether it would give one organization too much power in the British media.

Mr. Murdoch and his family are major shareholders of both Fox and News Corp, which owns a number of British newspapers such as the Times of London, the Sunday Times and the Sun, the U.K.'s best-selling tabloid. Fox already owns 39% of Sky. It is seeking to buy the other 61% for GBP11.7 billion. News Corp also owns The Wall Street Journal.

Ms. Bradley said Tuesday that she had now decided to ask the CMA to review the merger on plurality grounds. But she also said she was now "minded to" refer the deal to the same regulator for a different reason: to determine whether Fox held a "genuine commitment to broadcasting standards." The "minded to" characterization is used by the government here to signal an official intention, but it isn't binding.

Ofcom, Britain's media regulator, had previously recommended against a referral on broadcasting-standards grounds.

Ms. Bradley said she was going against that advice Tuesday. She said she wanted regulators to examine whether Fox had a "genuine commitment" to follow British broadcasting codes, including rules for TV content and considerations like fairness and privacy. The review will last for six months.

She cited specifically a determination made earlier this year by Ofcom that Fox didn't have adequate compliance procedures in place to broadcast Fox News in the U.K. until after regulators raised the issue. At the time, Fox said it was "pleased that Ofcom recognizes that Sky, under full 21st Century Fox ownership, would remain a fit and proper holder of broadcast licenses."

Ofcom didn't specify which procedures were lacking. Fox last month stopped broadcasting Fox News in the U.K., citing low viewership.

Ms. Bradley also cited questions of corporate governance in the wake of the sexual harassment scandals at Fox News. The unit's top executive, Roger Ailes, resigned last year as chairman amid a company probe related to multiple sexual harassment claims against him. Mr. Ailes, who died earlier this year, denied any wrongdoing.

21st Century Fox has said the company had no knowledge of sexual-harassment allegations against Mr. Ailes or settlements of those complaints until former Fox News anchor Gretchen Carlson filed a lawsuit against Mr. Ailes.

Former Fox News anchor Bill O'Reilly left earlier this year after sexual harassment allegations were made against him. He has denied those allegations.

At the time of his exit, 21st Century Fox said the company and Mr. O'Reilly agreed he wouldn't return to the cable news network "after a thorough and careful review of the allegations."

In addition, U.S. authorities are probing whether Fox violated securities laws in its handling and disclosure of sexual harassment settlements. Fox has said it is cooperating with the probe.

Ofcom had previously said corporate-governance issues related to the scandal raised concerns about Fox's broadcasting standards, but that those concerns weren't significant enough to warrant a referral to the CMA. Ms. Bradley said she disagreed.

Earlier this year, a group of British politicians from across party lines wrote to Ofcom to urge regulators to block the Fox-Sky merger. In their letter, they said that Fox News is viewed as being a partisan news channel in the U.S. and were concerned about the "Foxification" of Sky's news channel in Britain, Sky News, should the merger go through. Ms. Bradley said regulators "may wish" to consider this matter, too.

"I consider it important that entities which adopt controversial or partisan approaches to news and current affairs in other jurisdictions should, at the same time, have a genuine commitment to broadcasting standards here," Ms. Bradley said.

Write to Stu Woo at Stu.Woo@wsj.com

 

(END) Dow Jones Newswires

September 12, 2017 14:09 ET (18:09 GMT)

Copyright (c) 2017 Dow Jones & Company, Inc.

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