ALEX BRUMMER: Sky’s the limit as Murdoch shows his hand

Money
Rupert Murdoch has upped his bid for Sky to £14 a share

Rupert Murdoch has upped his bid for Sky to £14 a share

Rupert Murdoch has upped his bid for Sky to £14 a share

The value of Sky just keeps rising. Who would have thought that a satellite broadcaster which less than two decades ago needed a merger to avoid extinction would now have a £24.5billion price on its head.

That is almost twice the market value of Sky before 21st Century Fox swooped in for the minority stake in 2016. 

Sky’s chief executive Jeremy Darroch thinks there may yet be more money on the table with rival cable giant Comcast not out of this bidding war.

Analysts argue that the value put on Sky is reaching fantasy land. The broadcaster’s 23m subscribers across Europe cannot possibly be worth that. 

But the Fox offer is not just about economics. It is about Rupert Murdoch’s dynasty planning. If Fox can turn its 39 per cent stake in Sky into full control then it will have leverage in making the Disney purchase of most of 21st Century Fox’s assets happen.

This would cut the Murdoch tax liabilities, since part of the Disney offer is in shares, gift the family a sizeable stake in Disney and ensure that the next generation has a continuing interest in the empire. 

Lachlan would have the rump of Fox to run and James, if he wants it, could join Hollywood as part of Disney.

This time around the track Fox is giving itself a helping hand to make it harder for Comcast and the rival Roberts dynasty to compete. Interim chairman Martin Gilbert and the Sky board have eased the way for a Murdoch victory by allowing the deal to be settled by a simple majority. 

As Fox already owns 39 per cent of the stock that means it only needs 11 per cent of outside investors to sign up to seize full control.

These are desperate days for media fearful that the new players Netflix and Amazon, with enormous production budgets, are firing up missiles ready to shoot existing creative houses out of the water. 

That is why Comcast is so prepared to put its balance sheet on the line by borrowing to outbid Disney both for 21st Century Fox and Sky.

This battle is part of an existential fight against the disrupters which has sent the value of creativity soaring.

Switching jockeys

The changing of the guard at the top of J Sainsbury looks flat-footed. The choice of former Deloitte partner Martin Scicluna as next chairman is at best unimaginative.

It is the wrong time for the current chairman, David Tyler, to step aside. He may be near to completing the nine-year governance compliant limit in the top job. 

But losing Tyler in the middle of the merger dance with Asda, creating Britain’s biggest grocer, is mistaken.

Tyler has a fine record of leading corporate deals from the break-up and sell-off of GUS to the purchase of Argos owner Home Retail Group.

He has a cerebral understanding of current challenges facing British retail and is the ideal person to steer the Asda deal, if it makes it through competition scrutiny, to the finish line and beyond.

Which brings us to Scicluna. He may well be an excellent person but his role (if only for a short while) as one of the directors who brought us the disastrous Lloyds-HBOS merger does not bode well. 

Moreover, as we are discovering, working for the Big Four accounting firms does not necessarily mean skill and integrity.

The biggest criticism is that he is a retail neophyte. Relevant background is essential to be chairman. The arrival of Archie Norman as chairman of M&S has brought a glaring honesty to the table. 

The satellite group Inmarsat has been able to preserve its independence because the board is filled with relevant skills. No bank post-financial crisis would choose a chairman without deep City experience.

Nominations chief Dame Susan Rice deserves no Nectar points for this choice.

River dance

Quoted property group New River is the exception proving the rule.

Amid the gloom about retail it invests in unfashionable locations and is ploughing £15.3million into the Hollywood Retail & Leisure Park at Barrow-in-Furness. Aldi will be a cornerstone client with the opening of a 20,000 square foot store.

There should be no shortage of customers. BAE Systems, the dominant local employer, has just been awarded a £2.4billion contract to build the next generation of Royal Navy submarines in the town.

Keep shopping.

Leave a Reply