Crafty Fox fine-tunes offer for Sky, but leaves clues

Overnight, 21st Century Fox published an offer for Sky priced at £14 per share overnight, short of a rival bid from Comcast at £14.75 per share.

Although Fox, which owns 39% of Sky, needed to confirm its bid this week, under UK Takeover Panel rules, it has reserved its option to increase the offer level at any point before a 46-day deadline, which would be 22 September.

The takeover has been complicated by Disney's $71bn (£55bn) acquisition of Fox's entertainment assets, including the stake in Sky.

Importantly, Fox, which is owned by Rupert Murdoch and his family, flipped its bid to an offer from the previous scheme of arrangement, which will mean it will need only a simple majority of shareholders to approve. The Murdochs have set a threshold at 75% of shareholder votes but may reduce this to the minimum if needed to secure control.

Fox indicated it expected the offer to close by the end of October and retained the option to flip back to a scheme.

Although no definitive conclusions can be made about the potential acceptance level from shareholders, analysts at Olivetree said there were some "interesting clues as to Fox’s intentions" in the offer document, with the flip to an offer and the omission of standard rubric "suggests that £14 may not be Fox’s final level".

"Be clear, if Fox intended to stay at £14, there was little need to flip to an offer."

Olivetree noted that UK takeover rules you require a suitor to get 90% acceptances to squeeze out the last remaining shareholders, so for Sky, Fox would need to get to 90% of the 61% shares it does not already own, so around 54%.

"Put the other way round, a 6% owner of Sky can prevent a squeeze-out," analysts said. By keeping the condition at 75%, Fox has retained the ability to flip back to a scheme of arrangement and get around the squeeze-our rules, "which is a strong indication that Fox is worried about how it is going to get to 100% ownership. This is not something they are likely to be worried about if they intended to keep their offer level at £14."