UBS
Murdoch family rebuffs two approaches for Sky
Reports in the Telegraph over the weekend state that the Murdoch family/Fox could be considering a
new bid to take 100% control of Sky after rebuffing two recent approaches for their 39% stake in the
company.
Informal approaches from Vivendi and Vodafone
Specifically, the Telegraph report states that Vincent Bolloré, chairman of Vivendi, had made an informal
approach the Murdoch family earlier this year but talks did not progress given the latter wanted £18 per
Sky share. Sources in the report also state that Vodafone made an informal approach to the Murdoch
family last year but received a similar price demand and did not pursue discussions. Neither informal
approach was discussed by either the Fox or Sky boards according to the report.
A more favourable backdrop to re-visit a bid?
The Telegraph report indicates the recent promotion of James Murdoch to CEO of Fox (he was the
former CEO of Sky) and the recent election of a Conservative government as factors that could create a
more favourable backdrop to revisit a bid. Fox originally tried to take 100% control of Sky in 2010 but
ran into political opposition. Note Fox is covered by our US analyst Doug Mitchelson.
Valuation: PT based on DCF
We think the Telegraph report highlights the potential strategic value of Sky to a number of different
parties and this is not reflected in the current share price. We remain fundamentally positive on Sky and
believe investors have underestimated the upside to growth from new initiatives (NowTV, Adsmart and
Sky Store) and the benefits of scale from the Sky Europe deal (acquiring pan-European rights and
launching an online/OTT offer into new markets). We see Sky as cheap on 14.5x calendarised 2016 PF
EPS and offering c20% pa EPS growth.