21st Century Fox’s Sky Buyout Still in the Doldrums

Twenty-First Century Fox’s (FOXA) (or Fox’s) dream to gain full control of Europe’s largest pay-TV broadcaster Sky by the end of June 2018 came under scrutiny when Karen Bradley, culture secretary of the Competition and Markets Authority, asked for a detailed review. She also raised doubts about the company’s commitment to broadcasting standards and asked reviewers to examine it carefully.

From the graph above, we can see Fox’s revenue growth in the last five quarters. During that period, it grew at a CAGR (compound annual growth rate) of 1.9%. In 1Q18, its top line increased 7.6% YoY (year-over-year), driven by double-digit Cable Network Programming segment growth.

Fox’s deal with Sky has received regulatory approval from the European Commission and has clearance on public interest and plurality grounds in most of the markets in which Sky operates. But the timely completion of the deal looks uncertain. So the delay in approval may hurt Fox’s objective to gain a strong foothold across other European nations such as the United Kingdom, Ireland, Austria, Germany, and Italy. It could also drive its top line going forward.

Fox already holds a 39% share in Sky. So to strengthen its position in the European region as well as downplay competition with other large media giants across Europe such as Liberty Global, Fox plans to acquire the remaining 61% stake of Sky. The proposed acquisition will cost $14.1 billion.

The proposed merger could face further uncertainty since Fox decided to sell its film and TV studios, the Hulu streaming hub, and other media assets, including the 39% share in Sky, to media mogul The Walt Disney Company (DIS).