By Ben Martin
LONDON (Reuters) - Hedge fund manager Crispin Odey has argued that Sky (L:SKYB) should fetch a higher price following Walt Disney Co's (N:DIS) $52 billion deal with Twenty-First Century Fox Inc. (O:FOXA), adding to shareholder disquiet about the fate of the European broadcaster.
Rupert Murdoch's Fox agreed last December to buy the 61 percent of Sky that it does not already own for 10.75 pounds-a-share but the deal has been delayed by a regulatory review.
Fox's existing 39 percent stake in Sky is now part of a wider package of film, television and international assets being sold to Disney, a deal that Odey believes demonstrates that Sky is being sold too cheaply.
If approved by regulators, Fox's takeover of Sky is expected to close by the end of next June, before the completion of the Disney acquisition. That means Mickey Mouse-owner Disney would acquire all of the UK company following its deal with Fox.
"Basically, here is Fox being bought-out on 12 times cashflow," Odey, whose hedge fund is a 0.9 percent investor Sky company, told Reuters. "If we [Sky shareholders] were being sold on 12 times cashflow we'd be at 12.30 pounds."
Sky shares were up 0.6 percent at 10.24 pounds on Monday.
A spokesman for Sky declined to comment. Fox and Disney did not immediately respond to requests for comment.
Disney's deal with Fox, announced on Dec. 14, adds another complication to the 11.7 billion-pound ($15.6 billion) Sky deal, which has already faced fierce criticism from British politicians and is being investigated by the UK's Competition and Markets Authority.
Odey, who had previously criticized the planned Fox deal, joins fellow small shareholder Polygon in questioning the takeover of the FTSE 100 company in the wake of the Disney deal.
TWIST IN THE TALE
The UK's Takeover Panel said last week that it had been told by Disney that the U.S. giant did not believe it should be forced to make an offer for Sky if Fox is blocked from buying out the remaining 61 percent by the regulator.
Disney would hold a 39 percent stake in Sky if the Fox acquisition of the broadcaster fails.
Rule 9.1 of the Takeover Panel's code stipulates that an investor buying 30 percent or more of a listed company must automatically make an offer for the rest of the shares, although exemptions can be agreed by the watchdog.
The Panel's executive said it was seeking the views of Sky's independent directors before making a decision on Disney.
"In the case of Disney/Fox, if Disney had agreed to buy the 39 percent Sky stake directly from Fox, minority shareholders in Sky would have been entitled to an increase in the 10.75 pounds-per-share price already being offered by Fox to the price being offered by Disney," Polygon said.
Given that Disney is paying about 12 times 2017 and 2018 enterprise value to earnings before interest, taxes, depreciation and amortization for the Fox businesses, the hedge fund said that the price for Sky should be more than 13 pound-a-share.
"But the Fox and the Mouse have been more clever than that," Polygon said.
"They have wrapped the Sky stake with a number of other attractive Fox assets and tied it up with a bow and ribbon and told the Takeover Panel that Rule 9.1 does not apply – and therefore that no premium is due to Sky's minority shareholders."
