Murdoch march Raymond Snoddy examines the wider implications of the biggest deal in the media mogul’s controversial career
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upert Murdoch’s 80th birthday present is going to arrive very late – but arrive it will, probably sometime around September. It will take the form of the biggest deal of a long and controversial career, the final and total takeover of British Satellite Broadcasting, the company formed out of the ‘merger’ of Sky and BSB 21 years ago. The £9 billion to £10 billion deal to buy the 61 per cent of BSkyB his News Corporation does not already own is all over bar the shouting, although the shouting will be loud and there will be a few trips around the dance-floor before all the signatures are in. Murdoch has once again given a virtuoso performance at what he has always done best – persuading governments and regulatory authorities to bend to his will and decide that remedies have been successfully found to limit any threat to competition or prevent any diminution of media plurality. Not for the first time Murdoch gave a master class in the arcane art, unhindered by a reputation for breaching undertakings in the past. Culture secretary Jeremy Hunt had stated publicly he was minded to send the deal straight to the Competition Commission for a full investigation, as recommended by the communications regulator Ofcom. An open and shut matter, surely, given the scale of the deal and the political sensitivities of the issues involved? Not so, because Hunt was also very mindful from the outset of the potential for litigation; indeed at the time he publicly bemoaned the fact that there would probably be a judicial review whatever he decided. To avoid the lawyers Hunt had a legal requirement to consider fully any proposed BSkyB remedy to counter what was perceived as the main threat from the takeover – the potential undermining of the editorial independence of the award-winning Sky News channel. 16 | theJournalist
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The real issue is all that cash and what Murdoch will do with it
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Critics, not least Murdoch’s media rivals, cried to no avail that Sky News was a sideshow and that the real threat to media diversity came from the £800 million a year, and rising, of free cash flow being thrown off by the satellite broadcaster. But such complaints will soon be history. The last great piece of financial eloquence now required of Murdoch is to find the right number that will persuade BSkyB’s institutional shareholders to sell their shares. They will be tougher to convince than either the Government or the regulators. Like Murdoch, they know just how well BSkyB is doing and will do in future now that the huge investment phase is nearly over and that, apart from the usual rows over sports rights, it’s time to take in the money. The institutions will not want to look like mugs. The independent directors dismissed an opening bid of 700p and indicated that 800p was the minimum needed to start a serious conversation. Later one of the shareholders, Fidelity Investments, made it clear it thought a ‘fair price’ would be 950p and that maybe an additional premium would have to be paid for the advantage of full ownership. That would cost Murdoch more than £10.5 billion. And to make matters worse for the Australian/American the movement in the dollar-pound exchange rate since the deal was first proposed has gone against the media mogul by around 10 per cent. In an uncertain world you can still be certain that Murdoch will eventually get the only birthday present he really wants because the News Corp chairman holds the key card. He is the only possible buyer and can therefore control the pace and the tactics of the negotiation. Murdoch just has to walk away – and he will probably do so more than once – and the share price will sink like a stone from the 825p mark. So you don’t have to be a genius to work out that the deal will finally be struck in the 850p to 875p range. As well as bamboozling regulators Murdoch also has a record of over-paying for what he wants, at least in the short term. Not long after paying $5.7 billion for Dow Jones and the Wall Street Journal, no less than $2.8 billion was written off the book value of the company. Over-paying on a grand scale.
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