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Sky shares slide on Fox‑Disney talks

Sky shares pared early opening losses to trade 1 per cent lower in late afternoon trading in London after 21st Century Fox held talks with Disney to sell its stake in the British satellite broadcaster as part of a disposal of assets.

Disney has discussed buying 21st Century Fox’s movie and some TV assets, leaving 21st Century to focus on news and sports. Sources said that the talks had broken down over a disagreement on price.

21st Century Fox owns 39 per cent of Sky and has bid £11.7 billion for the rest of it. Analysts at Liberium said that the Disney talks could have negative points for the Sky deal.

It said: “Fox may scrap its bid for Sky as part of the proposed sale of assets . . . and Fox’s willingness to consider including the Sky stake as part of the disposal assets is a signal that it feels less confident over gaining regulatory approval from the UK government.”

Liberum remained confident that the Sky deal would go through. “We still see a successful conclusion of the bid as the most likely conclusion, which means the shares offer significant upside, however we understand this news will cause further uncertainty. ”

The Competition and Markets Authority is scrutinising the Sky deal and how the deal would affect media plurality and broadcasting standards in Britain.

Liberum said: “If there are any roadblocks put in the way, it will be around ownership of Sky News, which we think Fox would be happy to sacrifice to get a deal. We also think, given the current political weakness of the UK government, it would be wary of potential criticism of the Murdoch family newspapers.”

Rupert Murdoch, the chairman of News Corp, owner of The Times, is co-chairman of 21st Century Fox with his son Lachlan. His other son, James, is chief executive of 21st Century Fox and chairman of Sky.

The other upside for Sky shares was that Disney was likely be interested in the broadcaster. “We think Disney has had a longstanding interest in Sky, so if it did buy the Fox stake Disney could make a bid for the remaining stake,” said the analysts, who rate Sky shares a buy.

Although the Sky shares fell sharply at the start of trading they have recovered to be trading down 1 per cent at 930p at the close in London.

A takeover of 21st Century Fox’s stake in Sky would give Disney additional exposure to the British, Italian and German satellite TV markets. 21st Century Fox also owns Star TV, a pan-Asian satellite broadcaster. Disney is about to launch a streaming video network to compete with Netflix, Amazon Prime Video, HBO Go and others. The entertainment company said in August that it would pull its content from Netflix. Buying 21st Century Fox’s film and TV assets would provide Disney with additional content for its new streaming service.

Analysts at Credit Suisse said that the Disney talks increased uncertainty around the Sky deal. They said that Disney might want Sky as part of an international streaming strategy, but that a deal would also deepen its exposure to traditional businesses that have been under pressure.

Steven Cahill at RBC Capital Markets said: “We see the real strategy here as Fox content helping Disney build out its direct-to-consumer strategy.”

Shares in 21st Century Fox opened higher on Wall Street today and by mid-morning were 3 per cent up at $28.27 after the talks were revealed and Disney shares had risen 1.8 per cent to $102.41.