Twenty-First Century Fox (NASDAQ: FOXA) To Be Acquired By British Sky Broadcasting Broup (LON: BSY)

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By Erik Waters on July 25, 2014 Company, Intl News

On Friday, Twenty-First Century Fox (NASDAQ: FOXA) announced that it will sell its Germany and Italian television assets to British Sky Broadcasting Group (LON: BSY). The transaction is said to have cost the British satellite broadcasting company $9 billion.

This deal is the latest indication of consolidation in the media industry in Euope. British Sky Broadcasting Group is owned 39% by Robert Murdoch, the owner of Twenty-First Century Fox.

Recently, Twenty-First Century Fox offered $80 billion to Time Warner (NASDAQ: TWX). Time Warner rejected this offer.

By selling its European assets, Twenty-First Century Fox could provide the American broadcasting compay with the additional financial power that it needs to make another increased offer for to purchase Time Warner, as Murdoch has expressed his determination and desire to purchase the media company.

In the deal with British Sky Broadcasting Group, Twenty-First Century Fox keeps its 39% minority stake in the British broadcasting group. This move allows Twenty-First Century Fox to keep an advantageous position to gain from any deals to be made in the future that involve consolidation in the telecom and media industries in Europe. Industry leaders like Liberty Global, the cable company owned by John C. Malone, are planning to offer pay-television content to their customers in the area.

For British Sky Broadcasting, one of the largest pay-television providers in Europe, this deal enables the company to expand its influence in the area. If the deal actually goes through, Twenty-First Century Fox’s Italian and German assets would give British Sky Broadcasting the ability to offer premium movie and sports services to about 20 million users in regions from Italy to Ireland. The company already has well-paying deals with European sports leagues, including the English Premier Soccer League.

British Sky Broadcasting’s chief executive, Jeremy Darroch, expressed his optimism about the deal, stating that the company will without question be stronger after merging with Twenty-First Century Fox. The acquisition will bring good news for both investors and customers.

The deal still awaits approval from British Sky Broadcasting’s minority shareholders as well as industry regulators. Antitrust officials are taking an interest in the deal and will probably examine how this merger will affect customers and their options.

According to the terms of the deal, British Sky Broadcasting will get 100% holding in Sky Italia for £2.5 billion, roughly $4.3 billion. This deal would be partially paid with £2.1 billion in cash, and the remaining £380 million paid for by transferring the 21% stake British Sky Broadcasting has in National Geographic to Twenty-First Century Fox.

The British company will purchase the 57% stake that Twenty-First Century Fox has in Sky Deutschland for £2.9 billion. British Sky Broadcasting must buy Sky Deutschland’s minority shareholder shares for €6.75, roughly $9.09, each.

Additionally, British Sky Broadcasting may have to pay $12 billion for assets of the European pay-television company.

The British company’s stock price fell 4.8% during trading on Friday in London, showing that investors do not have positive thoughts on the deal.

Twenty-First Century Fox’s Buyback Program

As for Twenty-First Century Fox, the company will use the funds from this deal to launch a new program to buyback shares, as well as improve its offer to purchase Time Warner.

The company approved a buyback plan last year, to buyback $4 billion worth of shares. The new plan, which will be announced on August 6^th, will be launched regardless of any prospective future investment or purchases.