Photographer: Chris Ratcliffe/Bloomberg

Fox Is Willing to Make Concessions to Win Approval for Sky Bid

21st Century Fox Inc., trying to win government approval for its $15 billion deal for control of Sky Plc, is prepared to make concessions to U.K. regulators who are scrutinizing its suitability as a media owner, according to people familiar with the matter.

The film and television company is willing to negotiate over remedies if necessary, including changes to corporate governance, though it doesn’t expect to be asked for major alterations, said the people, who asked not to be identified discussing private information. Fox, which already owns 39 percent of Sky, isn’t considering spinning off Sky News or creating an independent board, one of the people said.

Lawyers representing people who have filed sexual harassment and racial discrimination claims against Fox have been in the U.K. this week to meet with regulator Ofcom. They argue that Fox, controlled by billionaire Rupert Murdoch, didn’t have the proper oversight to protect employees and shouldn’t be allowed to expand its media ownership.

Investors haven’t wavered in recent weeks in their bets on whether the deal goes through. The shares have remained stable at just under 1,000 pence, compared with a bid price of 1,075 pence. The consensus among Sky investors is that the deal won’t be blocked, though there is some uncertainty about regulatory issues, Credit Suisse analysts said in a May 10 report.

Ofcom is assessing whether Sky would continue to be a “fit and proper” holder of a broadcasting license following the Fox takeover, a standard that involves reviewing potential misconduct by executives. Failing that test would effectively block the deal.

Murdoch’s previous bid for Sky was sunk by a phone-hacking scandal six years ago. Fox is also being investigated by federal prosecutors in the U.S. over whether investors should have been informed about payments the company made to employees to settle sexual harassment allegations.

One of the accusers’ lawyers, Lisa Bloom, addressed some Sky investors this week in a meeting hosted by Enders Analysis, the U.K.-based media consulting firm that provides industry research to clients including investment groups.

The meeting was attended by a small group of media investors that include HBK Europe Management, Pine River Capital and Pentwater Capital Management. “There’s no question that what’s been going on has some relevance,” said Alice Enders, head of research at Enders Analysis. “All of this is burdening the bid.”

Some analysts have questioned whether Ofcom could propose a way to create a degree of independence at Sky even if Fox acquires the company. They point to the agency’s move to establish independent corporate governance for BT Group Plc’s Openreach division.

Bloom and Wendy Walsh, who has made sexual harassment allegations against former Fox News host Bill O’Reilly, met with Ofcom Monday to argue for the deal to be blocked, while Douglas Wigdor, an attorney for other former Fox employees, met Ofcom Thursday. O’Reilly has denied the allegations against him.

“It would be irresponsible of Ofcom to let this bid through,” Bloom said after the Monday meeting.

Fox said it’s made a “clear commitment” to keeping its workplace safe and free of discrimination. “The company’s management has taken prompt and decisive action to address reports of sexual harassment and workplace issues at Fox News,” it said in a statement.

Ofcom is also assessing the deal on public-interest grounds and will report its findings to the U.K. Culture Secretary, currently Karen Bradley, by June 20. The secretary will make the final decision on whether the deal can proceed.

Ofcom last conducted an extensive fit and proper assessment of Sky in 2012 following the phone-hacking scandal at News International, a division of News Corp., which owned about 40 percent of Sky. Ofcom cleared the company then, yet criticized James Murdoch, now chief executive officer of Fox and chairman of Sky, for his conduct as head of News International. At the time, News Corp. said the allegations that James Murdoch failed in his duties as a director weren’t backed by evidence.

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