News Corp’s bid for full ownership of British Sky Broadcasting Group Plc (BSY) will be examined by U.K. Business Secretary Vince Cable on the “rule of law” despite the demands from other media companies to block the deal, BSkyB Chief Financial Officer Andrew Griffith said.
The proposed 7.8 billion-pound ($12.2 billion) takeover bid for the U.K.’s largest pay-television operator will be considered by Cable based on legal considerations “rather than the commercial noise and lobby of competitors,” Griffith said today on Bloomberg TV’s “Countdown with Maryam Nemazee.”
Opposition to the proposed offer has mounted with U.K. newspapers, the British Broadcasting Corp. and BT Group Plc (BT/A) signing a joint letter to Cable calling for the bid to be challenged by the U.K. government.
Rupert Murdoch’s News Corp. made its offer conditional on winning regulatory approval. BSkyB said today the regulatory and financial conditions of the bid added “considerable uncertainty to when and whether any formal offer could be made.”
News Corp. is scheduled to formally notify the European Commission in the “near term,” BSkyB Chief Executive Officer Jeremy Darroch said today on a conference call with reporters. BSkyB spent 2 million pounds on advisory fees during the three months ended Sept. 30.
The broadcaster said today fiscal first-quarter operating profit rose 25 percent as it shifted marketing toward its broadband offering.
Earnings before interest, taxes and exceptional items in the three months through September increased to 255 million pounds, the Isleworth, England-based company said in a statement today. That beat the 240 million-pound average estimate of seven analysts surveyed by Bloomberg. Sales rose 15 percent to 1.53 billion pounds.
BSkyB is nearing a target of 10 million subscribers by the end of this year, after adding 96,000 net new subscribers in the period, taking it to a total of 9.96 million. The company is in “touching distance” of its full-year target, Darroch said.
The pay-television operator has sought to attract customers to its high-definition services after cutting installation prices for set-top boxes.
“BSkyB goes from strength to strength as it reported a solid set of first-quarter numbers,” said Manoj Ladwa, a senior trader at ETX Capital. “The broadcaster is also reaping the benefits of a strategy shift as it increasingly cross-sells to its expanding customer base. Both are factors that are likely to see News Corp. either raise its offer quite significantly or walk away.”
The broadcaster may not set a further customer target after 2010 as the pay-TV market matures, analysts have said. The company said today that 2.3 million customers now take all three television, broadband and telephone services. BSkyB may shift its focus to selling more products to its existing customers once the 10 million client target has been reached, analysts including Nick Bell of Jefferies International Ltd. have said.
BSkyB’s independent directors, led by Nicholas Ferguson, chairman of SVG Capital, have said they may accept an offer of more than 800 pence a share. There is a “significant gap” between News Corp.’s 700 pence-a-share proposal and the value of the company, Ferguson said in June.
The stock rose as much as 1.1 percent, or 7.5 pence, to 705 pence, and was up 0.4 percent at 700.5 pence as of 9:33 a.m. in London trading.
The independent directors are “absolutely unanimous” in wanting James Murdoch, Rupert Murdoch’s son, to remain as non-executive chairman, while the bid process takes place, Darroch said today.
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