21st Century Fox, expected to make a bigger bid for Time Warner, has agreed to transfer its satellite stakes in Italy and Germany to British Sky Broadcast and will receive $8.6 billion in cash plus other assets.
The deal creates a giant Pan European digital satellite broadcaster and 21st Century Fox will have a 39.1% stake in the larger BSkyB. Analysts also expect the cash to help fund Fox CEO Rupert Murdoch’s continued pursuit of Time Warner, which has already rejected an offer worth about $80 billion.
“We have always believed that a combination of the European Skys would create enormous benefits for the combined business and for our shareholders,” James Murdoch, co-chief operating officer of 21st Century Fox, said in a statement. “Ultimately, a pan-European Sky is good for customers, who will benefit from the accelerated technological innovation and enhanced customer experience made possible by a fully integrated business.”
Details of the deal include 21st Century Fox receiving about $9.3 billion from BSkyB, including $8.6 billion in cash and BSkyB’s 21% interest in National Geographic Channels International. The transaction brings Fox’s stake in NatGeo Channels International to 73%. Fox will also buy $900 million worth of share in BSkyB when BSkyB holds a previously announced equity offering. That leaves Fox with $7.2 billion in new cash.
21st Century Fox said it will continue it stock buyback plans despite its merger and acquisition activity and will announce a renewed share buyback authorization next month when it announces earnings.
“Our renewed authorization for our share buyback program will be executed regardless of any potential acquisition or investment activity by the Company,” said Rupert Murdoch. “21st Century Fox’s number one priority is increasing shareholder value in a disciplined manner and, as a result, we will only consider transactions that fully support this objective.”
“We view today's announcements (especially. the share repo) as a positive for Fox, confirming the company's commitment to creating shareholder value and remaining disciplined (especially, when it comes to the potential purchase of Time Warner),” Wells Fargo analyst Marci Ryvicker said Friday in a research note.