News Corp this morning looked to be edging closer to buying out BSkyB in full after entering into a ‘cooperation agreement’with the broadcaster to explore a buyout.
News Corp revealed this morning that it made a 675p a share bid for BSkyB last week which it has since inreased to 700p.
Rupert Murdoch’s News Corp already owns 39 per cent of BSkyB.
In a statement this morning News Corp said: ‘News Corp and the BSkyB Independent Directors have been unable to reach a mutually agreeable price at the current time.
‘However, both parties have agreed to work together to proceed with the regulatory process in order to facilitate a proposed transaction and, accordingly, we have agreed to enter into a Cooperation Agreement.”
The current proposal represents a 22 per cent premium on BSkyB’s 574p share price at close of business on 9 June and equates to £7.8bn.
It values BSkyB at around £12bn and is 11.8 times BSkyB’s pre-tax profits of £1.139bn for the year to 31 March 2010.
The independent directors of BSkyB said in a statement this morning that the current offer under-values the business and that they would only consider an offer over 800p per share. This would mean Murdoch’s News Corp finding another £1.1bn.
Under the co-operating agreement the two companies are going to seek to clear the regulatory hurdles allowing a deal and News Corporation must pay BSkyB £38.5m if it fails to make a firm offer within five months of obtaining merger clearance.
A committee comprising the independent directors and the executive directors of BSkyB has been formed to consider the proposed buyout. News Corp chairman Rupert Murdoch’s son James is non-executive chairman of BSkyB.
Nicholas Ferguson, BSkyB’s senior independent non-executive director, said in a statement this morning: “The eight independent directors have evaluated the proposal since receiving News Corporation’s approach on 10 June.
‘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.
‘We believe the company has a track record of very strong performance and excellent growth prospects. The management team will remain fully focused on its strategic and operational priorities, positioning the Company well to grow earnings and cash and increase returns for shareholders. The Independent Directors remain fully committed to acting in the interests of all shareholders and will continue to meet on a regular basis.”