The eight independent directors of BSkyB have said they would recommend a price of 800p a share for a takeover of the company by News Corp, valuing the company at £14 billion, following a rejection of the media giant’s revised 700p a share offer to acquire the 61% of the company it doesn’t already own.
UK pay TV operator BSkyB’s share price hit 732p this morning on news of the bid. It emerged earlier today that News Corp made a bid last week of 675p a share for Sky, which was rejected by the independent directors as undervaluing the company.
News Corp subsequently made a revised offer of 700p a share, valuing the 61% stake at £7.8bn. BSkyB said this proposal was still insufficient but called for talks to achieve “an agreed proposal for the mutual benefit of all shareholders”.
The company said it was putting together a committee of independent and executive directors to exercise the powers of the board in relation to any further offer. The committee will have the power to regulate the attendance of directors connected with News Corp at meetings of the board.
News Corp’s offer, which values BSkyB at approximately £12 billion, is seen by the board as deeply undervaluing the company. According to press reports, News Corp has threatened to walk away from the deal, while Sky is examining options including putting the merger on ice if the pair fail to agree terms. BSkyB chairman James Murdoch is expected to absent himself from Sky board meetings on the matter to avoid a conflict of interest.
Rumours of a possible News Corp takeover and delisting of Sky originally surfaced in March, when speculation that News was about to offer 735p a share boosted the pay TV operator’s stock price.
BSkyB and News Corp have entered into an agreement whereby the former has agreed not to request the Takeover Panel to issue a “put up or shut up” notice on News Corp in line with the City Code on Takeovers and Mergers and News Corp has agreed not to offer to acquire an interest in Sky’s shares or take action that would require it make a takeover without the consent of the independent directors within two months of receiving regulatory clearance.
Any offer must win the support of 70% of Sky’s shareholders (including News Corp’s existing shares), up to five months following regulatory clearance. If News Corp fails to make an offer within five months of achieving regulatory approval for a merger up to December 31 2011, it will pay a fee of £38.5m to BSkyB.
BSkyB senior independent non-executive director Nicholas Ferguson said, ” Based on careful review and advice, it is the unanimous view of the Independent Directors that there is a significant gap between the proposal from News Corporation and the value of the company.”