So Rupert Murdochs 21st Century Fox has agreed a price for a takeover deal with Sky plc (LSE: SKY).
An earlier attempt by Murdoch to take control of the whole of Sky was derailed after News of the World hackers were found to have tapped into the phones of celebrities and murdered teenager Milly Dowler. Now hes trying again.
The new deal is, apparently, worth 10.75 per Sky share in cash, and it s being lauded by the bosses of both Fox and Sky though thats not really any surprise, with Ruperts son James being the chief executive of Fox and the chairman of Sky.
Should the takeover go ahead? In my view, for the sake of Sky shareholders, it shouldnt.
Several major investors in Sky, including Jupiter Asset Management, have expressed doubt that its the best deal that could have been reached, questioning the true independence of the firms independent directors. Thomas Moore of Standard Life Investments went so far to say that James Murdochs interest in both companies means it cant really be an arms-length deal.
The Sky share price offers a premium to its levels of last week before we knew of the possibility of an offer, but its actually dropped back a little today to 974p. Thats nearly 10% below the offer price, which reflects the serious levels of uncertainty surrounding it.
Many consider the offer to be a lowball attempt to snap up Sky on the cheap, after its shares have had a very poor year. The mooted 10.75 is actually significantly behind the 11.75 levels that Sky shares were fetching at the end of December 2015, and it places a low valuation on a company that in my view has a strong long-term future.
Even at todays hiked price, Sky shares are still on a forward P/E multiple of only a little over 17.
Sky has also been steadily lifting its well-covered dividends for years. In fact, the year to June 2016 was Skys 12th consecutive year of dividend growth, and the firm told us that it remains our policy to maintain a progressive dividend policy. At todays elevated price, were looking at a forecast yield of 3.6% for the year to June 2017 and even at the offer price, wed still see 3.2%, pretty much bang on the FTSE 100 average.
Not a sell
On valuations like that, I really dont see the Fox offer as being remotely attractive in fact, even at 10.75 apiece, Id be thinking of Sky shares as a possible long-term buy, not a quick sell.
Of course, this doesnt even touch on regulatory concerns, and watchdogs (who, apparently, havent yet been formally notified of the plan) will be scrutinising the matter onconcerns that the Murdoch family would gain too much influence over UK media.
Whatever happens, it will surely be some time yet before we learn of the final outcome of all this.
Theres a nice bit of profit to be had there for todays buyers if the takeover should prove successful. But thats a big if, and I see the deal as a vulture attack on a company whose shares are temporarily down. And one which is very much in the interests of 21st Century Fox and of the Murdochs, and not of ordinary Sky shareholders.
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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.