Sky Deutschland shareholder attacks BSkyB approach
One of the UK’s best known hedge fund managers has launched a broadside against BSkyB’s attempt to create a united European pay-TV operator, arguing the proposal “massively undervalues” Sky Deutschland, its German sister company.
Crispin Odey, who with an 8 per cent stake in Sky Deutschland is the company’s largest minority shareholder, said he would resist any attempt by BSkyB to push through a “nil-premium takeover” after the UK pay-TV operator confirmed it was in talks with 21st Century Fox, the largest shareholder in BSkyB, Sky Deutschland and Sky Italia.
“While it makes quite a lot of sense for BSkyB to own Sky Deutschland, because a lot of its technology and knowhow has come straight from Sky, a nil-premium merger that massively undervalues the company does not make sense for minority shareholders,” Mr Odey said.
“We are minded to fight, and other shareholders in Sky Deutschland should be involved in the debate over how this company is going to grow.”
Shares in Sky Deutschland surged 9.5 per cent on Monday after BSkyB confirmed the discussions with 21st Century Fox, valuing Mr Odey’s 8 per cent holding in the German company at about €440m. Shares in BSkyB fell 2.4 per cent.
Mr Odey, a former son-in-law of Rupert Murdoch, was an outspoken critic of the 21st Century Fox chairman’s failed attempt to buy out minority investors in BSkyB 2011, arguing the offer undervalued the company before the deal was derailed by the UK phone hacking scandal.
Under the plan to merge the companies’ European assets, BSkyB would acquire Fox’s stake in Sky Deutschland, which is 57 per cent of its total shares on a fully diluted basis, and would then be required to make a takeover offer for the minority shares.
“BSkyB would expect, subject to German minimum offer price rules, to make this offer without a premium,” the company said.
In a statement on Monday, Fox said: “Over the years we’ve had numerous internal discussions regarding the organisational and ownership structure of the European Sky-branded satellite platforms. From time to time these conversations have included BSkyB, however no agreement between the parties has ever been reached.”
Fox owns 39.1 per cent of BSkyB, about 57 per cent of Sky Deutschland and all of Sky Italia.
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Together the three European operators have about 19m television subscribers. Although they already collaborate on set-top box technology and other points, greater integration could allow them to bid for sports and entertainment rights. The talks come as BSkyB faces narrower growth opportunities in the UK, because of market penetration and competition from BT.
Analysts have raised questions about possible conflict of interests, because 21st Century Fox is also the biggest shareholder in BSkyB.
“[The potential deal] raises the question if there’s a fundamental conflict of interests of investors in Sky Deutschland and BSkyB and the interests of Fox,” said Claudio Aspesi, an analyst at Bernstein.
Mr Murdoch has previously frustrated fellow shareholders with his bid for the remainder of BSkyB in 2011, and his promotion of his sons to key executive positions, with some raising concerns over governance at the company.
One of BSkyB’s top 20 shareholders said: “This looks like a tidying up exercise on a grand scale. It is not clear if it is going to broaden the shareholder base, or if it is going to complicate issues over governance at BSkyB”.