Now we know what Rupert Murdoch plans to do with the billions of dollars in cash sitting on his balance sheet… try and buy back the farm in the shape of a rejected 12 billion pound bid for BSkyB.
News Corporation raised its proposal to 700p per share in cash, which values the 61% stake at 7.8 billion pounds or $US11.5 billion, for the 61% the company doesn’t own.
News owns 39% of the London-based satellite Pay TV giant.
News executives told analysts in New York overnight that the company was looking to borrow around $US4 billion to help finance the bid.
Independent directors of BSkyB have told News they want more than 800 p a share on the table before they will look at recommendation, but have agreed to ongoing talks.
The offer, now worth around $US16 billion, dwarfs the $US6 billion he paid for the Dow Jones Co (to get hold of the Wall Street Journal) which was subsequently halved by asset write-downs and impairments of $US3 billion.
The news saw News shares fall more than 2% in Australia, to $17.84, off 44c on the day.
News Corp had around $8.2 billion in cash on its balance sheet at the end of the March quarter and when quizzed on the post results teleconference, he and other executives were vague about what could be done with it, but left analysts with the impression that it could be looked at later in the year. It had gross debt of around $US13 billion.
London reports say Murdoch made the approach last week.
A takeover play of this size didn’t enter into any post results thinking.
BSkyB was valued at $US15.5 billion on the London Stock Exchange on Monday. Its shares took a run late last month when rumours of a deal first appeared.
It was the second time in recent months that a Murdoch bid had been whispered in the UK market, now its third time lucky.
The London Telegraph said "Rumours swept the market in March that News Corp was mulling a 735p-a-share offer for Sky, which would have valued the broadcaster at £12.9bn. Sky shares closed up 14 last night at 600.5p".
The paper said the offer was rejected by independent directors as "deeply undervaluing the company".
"News Corp reacted by threatening to walk away from the putative deal. Sky and its advisers were last night still considering the company’s options.
"Sky is understood to be examining a Plan B strategy should the two sides fail to agree on price, including the possibility of temporarily putting the deal on ice."
Any successful bid would tighten Murdoch’s already considerable control on Britain’s newspaper and TV sectors. He is the biggest publisher and currently owns 39% of BSkyB, with son James on the board and heading up the European and Asian operations out of London.
Led by James Murdoch, BSkyB attempted to take a 17% stake in struggling ITV, the biggest commercial FTA broadcaster in the UK.
Competition authorities blocked that and eventually forced a sell-down to under 8%. The stake was originally taken to frustrate plans Virgin Media had to merge with ITV.
Sky and James Murdoch complained long and hard at being forced to sell the ITV stake (at a loss of over 900 million pounds after write-downs). They went to court several times to try and defeat or delay the ruling.
Both Rupert and James have led the attack on the only real competition to BSkyB, the BBC, accusing it of wasting taxpayers money, engaging in anti-competitive behaviour and using its dominant position to stifle competition, everything News Corp’s competitors in the UK have accused it of doing.
News and the Murdochs want to neuter the BBC so they can have a free run on the internet.
The BBC has the biggest news and entertainment website in the UK, and the Daily Mail’s site is the biggest purely news site.
Murdoch’s papers are a long way behind. Murdoch’s Times and Sunday Times are due to start charging for access to their websites within the next two weeks, if previous promises are kept.
The takeover, if it comes, will test the new government’s willingness to take on big media and business interests and the rest of its term will be seen in the light of the eventual decision on any bid from News Corp.
Despite effectively controlling BSkyB, News needs the approval of one man in the end, Vince Cable, the new Business Secretary and deputy leader of the Liberal Democrats.
If there’s agreement on the price, the deal could take a year to complete.
