Approval Of The Fox/Sky Transaction Likely Despite UK Regulator Stalling, Says Rosenblatt

Rupert Murdoch's Twenty-First Century Fox Inc (NASDAQ: FOXA) already owns a 39-percent stake in the British-based satellite broadcaster Sky, but his quest to acquire the remaining 61 percent has now stalled.

Fox's £11.7 billion deal to acquire the remaining stake in Sky is now being questioned by British regulators who believe Murdoch's empire will gain "increased influence" over the country's news agenda and political process, the BBC reported.

Rosenblatt Securities' media analyst Alan Gould commented in a research report that the deal has valid reason to face scrutiny. But approval of the deal would be "likely" if Fox strengthens its arrangements regarding an independent editorial board at Sky News and also boosts its commitment to the channel.

Even a combined Fox/Sky/News media portfolio would rank as a "distant third" in the country to BBC, the analyst added. In fact, the combined entity would also be "far and away" from the dominant news source and behind ITN. Specifically, BBC reaches 77 percent of households, ITN stands at 39 percent and a combined Fox/Sky/News would reach just 31 percent of householders.

Also, the European Union weighed in on the proposed buyout and found that the transaction won't raise any competition concerns. Countries including Austria, Germany, Italy and Ireland have also approved the deal.

Finally, Ofcom, the communications regulator in the UK, has also recommended that if Sky were fully owned by Fox it would be fit and proper to hold broadcast licenses.

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Image Credit: By David Shankbone - Own work, CC BY 3.0, via Wikimedia Commons