21st Century Fox (NASDAQ: FOX) has reached a deal to buy the part of United Kingdom-based pay television service Sky that it did not already own for $14.8 billion.
Fox already owned 39% of the company, and will pay a premium of about 40% to acquire the remainder, according to a press release. The deal gives the broadcaster access to 22 Sky’s million subscribers in Britain, Ireland, Italy, Germany and Austria.
“As the founding shareholder of Sky, we are proud to have participated in its growth and development,” Fox said in a press release. “The strategic rationale for this combination is clear. It creates a global leader in content creation and distribution, enhances our sports and entertainment scale, and gives us unique and leading direct-to-consumer capabilities and technologies.”
The deal is likely to face intense regulatory scrutiny, but assuming it passed muster, Fox expects it to close in 2017. If the acquisition falls through, Fox will pay a 200 million pound breakup fee.
What does this mean for Fox?
This makes a ton of sense for Fox, which has been pursuing an agreement with Sky for years. It gives Rupert Murdoch’s company a much wider global platform that’s fully under its control. In short, it’s another in a string of recent deals that gives a content-producing company (Fox) ownership of a content distributor (Sky).
“Sky is the #1 PayTV brand in all its key markets, with an exciting growth runway in each” said Fox. “The enhanced capabilities of the combined company will be underpinned by a more geographically diverse and stable revenue base. It will also create an improved balance between subscription, affiliate fee, advertising and content revenues. This combination creates an agile organization that is equipped to better succeed in a global market.”
Biggest is better?
Changing television-watching habits have led a number of companies across the world to expand into both creating content and distributing it. Fox and Sky already both did some of each, but Fox has a large catalog of movie, film, and sports content (though rights issues will present problems there).
Buying Sky gives Fox new subscription revenue and a broader distribution platform for its own content. It’s hard to see how that benefits the public, so perhaps regulators will take issue, but it’s a smart move for the company.
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