Walt Disney Co. is keeping its options open regarding European broadcaster Sky Plc.

Disney is seeking to absorb the British pay-TV company as part of its $52.4 billion purchase of assets from 21st Century Fox Inc., announced Thursday. The deal assumes Fox, which owns 39 percent of Sky, will win U.K. approval first for its bid for the rest of the satellite provider.

Should Disney get only Fox’s existing Sky stake, the Burbank, California-based entertainment giant doesn’t believe it’s obligated to make an offer for the rest of the broadcaster, according to the U.K. Takeover Panel, a British authority.

That clouds the outlook for Sky shareholders, who’ve watched as the 11.7 billion ($15.7 billion) takeover from Rupert Murdoch’s Fox has been threatened by a rare and extensive review in the U.K., where critics have aired concerns about the 2011 phone-hacking scandal at his newspapers and harassment allegations at Fox News.

“It’s not the slam-dunk view for Sky,” said Alex DeGroote, media analyst at Cenkos Securities. “Your working assumption would be that it’s job done, 100 percent, no problem. That doesn’t appear to be the case based on what Disney are saying there.”

Disney said it will assume full ownership of Sky, including its outstanding debt, if Fox completes the takeover before the deal with Disney is final. Fox said it remains committed to completing the Sky offer and anticipates the deal to be done by June 30, subject to approval.

If U.K. regulators block the deal, “the existing shares in Sky will still go to Disney,” Murdoch said on a call with analysts. “It’ll be up to them what to do.”

Shares of Sky, Britain’s biggest pay-TV network, fell 1.9 percent to 990 pence at the market close in London, valuing the company at 17 billion pounds.

Disney Chief Executive Officer Bob Iger called Sky a “crown jewel” among Fox assets in an interview with Jonathan Ferro on Bloomberg TV and said he hopes Fox is successful acquiring Sky. “We certainly would be looking forward to having the opportunity to have Sky be part of our company.”

The Takeover Panel said it will make an announcement regarding its view on whether Disney has an obligation to make a full bid for Sky “in due course,” and will seek the views of Sky’s independent directors before making a decision.

Disney is relying on the so-called chain principle in the panel’s rules, by indirectly acquiring the stake through Fox. It would need to show that the Sky stake isn’t a significant part of the Fox assets it’s acquiring or that controlling Sky wasn’t a significant purpose for its purchase.

The likelihood of Disney eventually owning Sky may help persuade the U.K. government to approve Fox’s bid, with the knowledge it would end up in the hands of an owner less encumbered by sometimes controversial ties to the country.

Murdoch’s critics welcomed the prospect of Disney owning Sky, as a way to reduce the media baron’s influence in Britain. Murdoch’s News Corp. already owns the Sun, the Times of London and the Sunday Times newspapers.

“It removes a major worry that we would have excessive concentration of media ownership,” said Vince Cable, the leader of the opposition Liberal Democrat party.

Source:
courtesy of BLOOMBERG

by Thomas Seal and Joe Mayes

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