The Motley Fool

Why I’m buying more Sky plc after CMA blocks Fox bid

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.

Scene depicting the City of London, home of the FTSE 100
Image source: Getty Images.

Today, the Competition and Markets Authority announced its long-awaited decision on the takeover of Sky (LSE: SKY) by the Murdoch family’s 21st Century Fox. In a statement that’s unlikely to please the billionaire media mogul, the regulator has declared that the merger is not in the public interest because it is likely to have an effect on media plurality in the UK.

Specifically, the CMA report declares: “Our view is that although the MFT [Murdoch Family Trust] will not have full ownership of Sky following the transaction, the significantly increased control it will be able to exercise over Sky and Sky News is sufficient to give rise to concerns that, as a result of the transaction, there could be increased editorial alignment of Sky News and the newspapers owned by News Corp.”

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

However, while the regulator is recommending that the deal should be blocked in its current form, it does say that it could go ahead with a spin-off or divestiture of the Sky News operation “to insulate Sky News from the Murdoch Family Trust’s influence.”

But the CMA’s statement also acknowledges that Fox is in the process of selling itself to Disney in a $52.4bn deal agreed last year. This deal includes Fox’s stake in Sky. And if this merger is given the green light by US regulators, the CMA acknowledges that the concerns around plurality could “fall away.”  

Put simply, as everything stands today, it’s unlikely Fox will be allowed to acquire the 61% of Sky that it does not already own (the deadline for the CMA’s final report to the Secretary of State is 1 May 2018). 

What’s next for investors? 

So, what does this mean for shareholders? I think it could be good news. 

Sky is a highly profitable and growing business. At the end of this week, the company is slated to report its earnings for the six months ended 31 December 2017 and analysts are expecting pre-tax profit growth of 10%. For full-year 2018, earnings per share growth of 28% is projected, followed by an increase of 10% for 2019. If the merger stalls the group is also set to restart dividends with analysts estimating a yield of 3.5% on offer. Further, when the deal was announced, shareholders were promised a 10p per share special dividend if it fell apart. 

Overall then, as a standalone business, Sky is growing and blocking Fox’s bid is unlikely to slow growth. What’s more, it’s highly likely that if the Disney/Fox deal goes ahead, at some point in the future Disney will make an offer for the rest of Sky If the UK-based media group continues to grow earnings at a rate of 10% or more per annum, to convince shareholders to sell, Disney will have to make an offer that’s greater than Murdoch’s 1,075p per share price. 

All in all, even though the CMA’s recommendation is disappointing, over the next week, I’m going to be buying more Sky for my retirement portfolio. The business continues to expand, and at some point, I believe either Disney or Fox will make another attempt to absorb the company at an improved price. 

One Killer Stock For The Cybersecurity Surge

Cybersecurity is surging, with experts predicting that the cybersecurity market will reach US$366 billion by 2028more than double what it is today!

And with that kind of growth, this North American company stands to be the biggest winner.

Because their patented “self-repairing” technology is changing the cybersecurity landscape as we know it…

We think it has the potential to become the next famous tech success story.

In fact, we think it could become as big… or even BIGGER than Shopify.

Click here to see how you can uncover the name of this North American stock that’s taking over Silicon Valley, one device at a time…

Rupert Hargreaves owns shares in Sky Plc. The Motley Fool UK owns shares of and has recommended Walt Disney. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.