Karen Bradley, the Secretary of State for Culture, Media and Sport, says she is “minded to” refer 21st Century Fox’s £18.5bn takeover of Sky plc, the owner of Sky News, to competition watchdogs on grounds of broadcasting standards.
Ms Bradley had previously said she was minded to refer the bid to the Competition and Markets Authority on grounds of media plurality.
Her decision marks a hardening of the Government’s stance on what would be the biggestever takeover in the UK media industry.
Fox, the world’s fourth-largest media company after Comcast, Disney and Time Warner, already owns a 39.1% stake in Sky. It tabled a proposal just before Christmas to buy the remainder of the company for £11.7bn, valuing the whole of Sky at £18.5bn.
Shares of Sky, which are valued at 1075p each under the proposed takeover, fell by 5% when Ms Bradley announced her decision to the Commons. They have since rallied but currently stand at a discount of more than 12% to the offer price – suggesting growing scepticism among a number of investors that the takeover will go ahead.
Fox and Sky now have 10 working days in which to respond to Ms Bradley’s statement. After then, she said, she would seek to come to a final decision as promptly as she could.
The Competition and Markets Authority is likely to take six months in which to decide whether the takeover can go ahead. Ms Bradley, who has frequently stressed that this is a quasi-judicial process, will be obliged to adhere to the CMA’s decision. If it gives the deal the green light, Ms Bradley will have to as well.
In March, Ms Bradley asked Ofcom, the media and telecoms regulator, to investigate, under the 2002 Enterprise Act, whether the takeover was in the public interest on the grounds of media plurality and broadcasting standards.
Ofcom said there was no reason to think the deal was against the public interest on broadcasting standards grounds but indicated it did have concerns on plurality of media ownership.
Fox subsequently came up with remedies that were sufficient for Ofcom to no longer have an issue with the deal on plurality grounds – although Ms Bradley did.
However, following the decision, Ms Bradley was lobbied by a number of opponents of the deal, led by former Labour leader Ed Miliband and former business secretary Sir Vince Cable, to assess new evidence concerning Fox’s US operations. Ms Bradley asked Ofcom to do so.
On Tuesday, Ms Bradley said Ofcom had told her it had “non-fanciful” concerns about referring the deal on broadcasting standards grounds, these were not sufficient to warrant referring the deal to the CMA.
But Ms Bradley said: “The legal threshold for a reference to the CMA is low… the existence of non-fanciful concerns means that, as a matter of law, the threshold for a reference on the broadcasting standards ground is met.”
There was no immediate response from Fox, the international film and television giant behind hit shows such as The Simpsons and Modern Family. It has previously urged Ms Bradley not to delay further the referral to the CMA.
A separate review by the European Commission has already given a green light to the takeover. The deal has also been cleared by all of the other countries – Germany, Austria, Ireland and Italy – in which Sky broadcasts.