LONDON— 21st Century Fox Inc. FOX 2.16% offered to bolster the editorial independence of Sky SKYAY 1.18% PLC’s news operations to meet concerns of British regulators and ease approval of its $ 16 billion bid for the portion of the pay TV giant it doesn’t already own.
The offer is the latest move in what has become an important side show to the separate, $ 52 billion bid by Walt Disney Co. for a big chunk of Fox assets, including its 39% stake in Sky. The two deals aren’t technically connected, but Disney views Sky as an important component of its deal and a key to its plans to expand its international footprint.
Disney has said that should Fox fail to consolidate ownership of the British pay TV company, it could make its own bid for the rest of Sky after it completed its Fox purchase. Disney’s price for Fox, however, wouldn’t be affected either way, since Fox plans to use cash and debt rather than shares to fund the deal.
Amid signs Fox was getting closer to appeasing regulators, some hedge funds have been increasing their stakes in Sky. On Monday, Sky shares finished up 0.8% to £10.555 ($ 14.86.)
Sky this week is also involved in an auction to retain rights to broadcast English Premier League soccer games. If it can clinch the deal—and not spend a fortune doing so—that could also boost shares.
Another possible support for Sky’s share price: Either Fox or Comcast Inc. could come in with a higher bid, investors said. Comcast is contemplating reviving its own bid for Fox assets, according to people familiar with the matter. Apart from considering bidding for much of the same Fox assets as Disney, these people said, Comcast is also open to going after specific pieces, including Fox’s Sky stake.
Fox shares were up more than 2% in New York afternoon trading, after The Wall Street Journal on Sunday reported the new Comcast interest.
If the Fox-Sky deal wins government approval in London, Fox would still need 75% of Sky’s non-Fox shareholders to approve the deal. At least one prominent British investor, hedge-fund manager Crispen Odey, has called for a higher offer price from Fox following the Disney bid.
Elliott Management Corp., a U.S. hedge fund, has almost doubled its Sky stake since late January, to nearly 2%. Apart from investing in companies and advocating for strategic shifts, Elliott has also bought into acquisition targets and then pushed for a higher offer price. Elliott has declined to comment on its holding.
In December 2016 Fox proposed buying out the 61% of shares in Sky it doesn’t already own and has since faced a series of regulatory hurdles here. The most recent came last month, when antitrust regulators said in preliminary recommendations that Fox’s full ownership of Sky, and its Sky News business, would give the family of Rupert Murdoch too much influence in British media.
Fox’s predecessor, News Corp. , abandoned a bid to buy Sky in 2011 amid revelations that a newspaper it owned hacked into the phones of politicians and crime victims. The company apologized, closed the implicated newspaper and spun off its other newspapers into a new company that took the News Corp name.
The Murdoch family controls a 39% voting interest in both 21st Century Fox and News Corp, which publishes major British newspapers, including the Sun, the Times of London and the Sunday Times. News Corp also owns The Wall Street Journal. Fox has argued that online news sites and social media have diluted the influence of newspapers and television channels.
Last month, British regulators suggested two solutions to mitigate their concerns. Fox could sell Sky News to another company or spin it off as an independent venture. Or, it could structure oversight of the news division to ensure independence.
In a letter to antitrust regulators on Monday, Fox said it was willing to do the latter. It offered to create an independent board, initially comprising two existing independent directors on Sky’s board and a third member, with senior editorial or journalistic experience, nominated by Sky’s existing independent directors. A Fox committee of independent directors would nominate subsequent members, who would have to be approved by Britain’s culture secretary. These conditions would end should Disney complete its deal with Fox.
It is unclear whether the offer goes far enough to quell regulators’ concerns about the Murdochs’ influence. Britain’s Competition and Markets Authority, the regulator that raised its concerns last month, said it wasn’t yet convinced of the effectiveness of monitoring and enforcing a structure that would ensure Sky’s independence.
Critics of the Fox-Sky proposal, including a cross-party group of current and former British politicians, wrote to the regulator this month to argue that previous attempts to create independent boards to oversee the editorial independence of Mr. Murdoch’s newspapers have failed. It specified arrangements at The Wall Street Journal and The Times of London.
A News Corp spokesman said: “The integrity and professionalism of the journalists at The Wall Street Journal, the Times and the Sunday Times speaks for itself.”
The antitrust regulators plan to review responses to its preliminary recommendations and are scheduled to deliver final recommendations in May to the U.K. culture secretary, who can decide to approve the deal outright, approve it with conditions or reject it.