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Fox likely to sweeten terms of Sky offer, RBC thinks
Sky has effectively de-risked the threat of key sports broadcasting rights losses in the UK and Germany since the start of last year with renewals of both Premier League and Bundesliga rights, but analysts at RBC Capital Markets downgraded the stock on valuation ground.
However, RBC said that after the renewal of the FA Premier League rights, Sky was trading in line with US giant Fox's takeover offer, meaning Fox would likely bump its offer in order to get approval at the upcoming EGM, should regulatory clearance be given, leading RBC to raise its price target to 1,150p from 1,075p.
RBC said Fox's current takeover offer was no longer quite so attractive to Sky.
"Fox has reserved the right to convert its scheme of arrangement to a takeover offer. This would enable Fox to complete the deal much more easily (assuming regulatory approval) as Fox is allowed to use its 39% stake in the vote. However it comes at a cost as takeover offers do not automatically squeeze out minority shareholders," the analysts wrote.
While a new owner can de-list at 75% ownership and squeeze out minority owners at 90%, RBC believes Disney "would much prefer" to have 100% of the equity allowing full operational consolidation.
"Because of this, we believe Fox is more likely to prefer to sweeten the terms of its offer. Based on history we assume a 7% increase in the offer to 1150p, which we use as our new price target."
However, RBC said that after the renewal of the FA Premier League rights, Sky was trading in line with US giant Fox's takeover offer, meaning Fox would likely bump its offer in order to get approval at the upcoming EGM, should regulatory clearance be given, leading RBC to raise its price target to 1,150p from 1,075p.
RBC said Fox's current takeover offer was no longer quite so attractive to Sky.
"Fox has reserved the right to convert its scheme of arrangement to a takeover offer. This would enable Fox to complete the deal much more easily (assuming regulatory approval) as Fox is allowed to use its 39% stake in the vote. However it comes at a cost as takeover offers do not automatically squeeze out minority shareholders," the analysts wrote.
While a new owner can de-list at 75% ownership and squeeze out minority owners at 90%, RBC believes Disney "would much prefer" to have 100% of the equity allowing full operational consolidation.
"Because of this, we believe Fox is more likely to prefer to sweeten the terms of its offer. Based on history we assume a 7% increase in the offer to 1150p, which we use as our new price target."
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