British Sky Broadcasting Group, better known as BSkyB, likes the color of the cash offered by News Corp. (NASDAQ: NWS) but would like to see more of it. The British satellite broadcaster rejected an offer of $11.5 billion from News Corp. for the 61% of BSkyB that News Corp. does not currently own.
News Corp.’s offer equalled 700 pence/share, but BSkyB directors, acting on the advice of Morgan Stanley and UBS, are seeking more than 800 pence/share. The rejected offer is higher than the 675 pence/share offer that News Corp. made just a week ago.
BSkyB has about 9.8 million subscribers in the UK for television, Internet, telephone, and other services. US satellite providers Dish Network Corp. (NASDAQ: DISH) and DirecTV Group Inc. (NASDAQ: DTV) have about 14.1 million and 18.6 million subscribers, respectively.
The chairman of BSkyB’s board is the son of News Corp.’s principal owner, Rupert Murdoch. James Murdoch has removed himself from the acquisition process and a committee of independent board members and directors will make the decisions.
News Corp. is sitting on a cash hoard of about $8.2 billion, and there are plenty of shareholders who would like to see the company spend some money on a stock repurchase plan or special dividend. Purchasing BSkyB, which News Corp. already effectively controls, will not make these shareholders any happier.
BSkyB has also been told by the British regulators that it must sell its competitors access to some of its most popular programming at lower prices. The company is appealing the decision, but that attack on BSkyB’s cash flow could just pre-sage more to come.
News Corp. revenues have picked up again and cash flow is also healthy. The company carries $12.2 billion in long-term debt, and acquiring BSkyB will only add to that total.
If News Corp. decides that BSkyB is too rich at 800 pence/share, it might turn its attention to Dish Network, which has a current market cap of about $9.7 billion compared with BSkyB’s valuation of about $13.5 billion based on News Corp.’s latest bid. DirecTV’s market cap is about twice that, so it’s not a likely suspect.
News Corp.’s NWS stock shares were up nearly 7% today on nearly double usual daily volume.
