News Corp must pay extra £3bn for BSkyB says Fidelity

Published on Saturday 5 March 2011 22:18

A BIG institutional investor has demanded that Rupert Murdoch's News Corporation pays an extra £3 billion to take full ownership of satellite broadcaster BSkyB.

Fidelity Investments, which has a 300 million stake in BSkyB, is believed to have named its price in a letter to Sky's senior independent director, Nick Ferguson, City sources say.

News Corp has offered 700p a share for the 61 per cent of Sky which it did not already own, which equates to a total price of 7.8bn.

But Fidelity, one of the world's largest fund managers, is understood to have told Ferguson that Sky has a "fair value" of 950p a share and an additional premium for control would take an acceptable takeout price to over 10.6bn.

It comes as a major takeover hurdle was cleared for Murdoch last week when Culture Secretary Jeremy Hunt said he was minded to wave through the takeover by News Corp after it offered to spin off Sky News into a separate independent company and subsidise it for a decade.

BSkyB declined to comment yesterday. Analysts said the Fidelity letter was the first sign BSkyB shareholders were preparing for tense negotiations over price with News Corp, which also owns Fox Broadcasting Company and a stable of British newspapers including the Times, the Sun and the News of the World.

Shareholder value apart, critics of Hunt's decision say a successful takeover of BSkyB would increase Murdoch's dominance of the UK media.

News Corp already has more than one third of both the combined UK newspaper circulation market and of the television market by revenues.

Fidelity is expected to be joined by other influential Sky investors in arguing a higher price is fair as the broadcaster's trading performance has improved, with operating profits up 26 per cent to 520m in the last six months. The stock market has also risen since News Corp made its original approach last summer.

BSkyB's customer base passed ten million recently and it has successfully expanded into phone and broadband services alongside pay TV.

Under the terms offered by News Corp, existing BSkyB shareholders would be given an equivalent stake in the new company, but News Corp would not be allowed to increase its 39.1 per cent shareholding for ten years without permission from the government.

The new conditions accepted by the minister are subject to a 15-day public consultation period.

But an alliance of other media organisations has already indicated it is ready to take legal action to block the proposed arrangement.

The group, which includes BT, Guardian Media Group, Associated Newspapers, Trinity Mirror, Northcliffe Media and Telegraph Media Group, has said: "Smoke and mirrors will not protect media plurality in the UK from the overweening influence of News Corporation."