Is Vodafone Group plc Planning A Takeover Of British Sky Broadcasting Group plc?

Vodafone Group plc (LON:VOD) is tipped to be weighing up a bid for British Sky Broadcasting Group plc (LON:BSY) but will it make a move?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

vodafone

Ever since Vodafone Group plc (LSE:VOD) (NASDAQ: VOD.US) announced that it was going to sell its 45% stake in Verizon Wireless for $130 billion, there has been speculation that Vodafone itself will become a takeover target.

However, now it would appear as if Vodafone has become the predator, and it’s widely tipped that the company will swoop on British Sky Broadcasting Group plc (LSE: BSY) (NASDAQOTH: BSYBY. US). Indeed, this acquisition would fit well into Vodafone’s plan for growth, as the company seeks to expand into new markets due to slowing growth and contracting margins in the telecoms industry. Vodafone’s recent acquisition of German cable TV operator Kabel Deutschland was also part of the company’s push into new markets.

Fending off predators

Vodafone has much to gain from a tie-up with Sky. For example, Vodafone’s house broker UBS believes that synergies from the deal would be worth around 250p per Sky share to both parties, about £4 billion.

What’s more, it is widely speculated that Vodafone, now it has disposed of its share in Verizon Wireless, could become a takeover target to US telecoms giant AT&T. A deal with Sky could get AT&T off of Vodafone’s back, which is likely to mean a better return for shareholders in the long term.  

Still, there are rumours that Sky’s parent company, 21st Century Fox is seeking to unite its European operations, meaning a takeover of Sky, pushing Vodafone out of the picture. Moreover, 21st Century Fox is still a majority shareholder of Sky and it is likely that the company would veto any pan-European-tie-up in which it became a minority partner.

Other options

Having said all of that, many City analysts believe that Vodafone will not launch a bid for Sky right now. Indeed, if Vodafone were to launch a bid right now, the company would have to pay a significant premium for Sky’s shares, which is likely to offset any cost savings derived from the deal. In addition, Vodafone is still haunted by its ill-fated, overpriced, $183bn takeover of German company Mannesmann at the height of the telecom boom in 2000.

Nevertheless, a partnership between Vodafone and Sky is more likely, where discount Vodafone mobile contracts are bundled with Sky television packages.

Foolish round-up

So overall, Sky would make a great acquisition for Vodafone. However, even though Sky is only a tenth the size of Vodafone, it is unlikely that Vodafone will make a bid. Even so, a partnership between the two companies is a likely scenario. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

> Rupert does not own any share mentioned within this article. The Motley Fool has recommended shares in BSkyB.

More on Investing Articles

Passive income text with pin graph chart on business table
Investing Articles

Yields of up to 7%! I’d consider boosting my income with these FTSE dividend stocks

The London market has some decent-looking dividend stocks right now, and I’m tempted by these two for growing income streams.

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

I’d put £20K in an ISA now to target a £1,900 monthly second income in future!

Christopher Ruane shares why he thinks a long-term approach to investing and careful selection of shares could help him build…

Read more »

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »