Joel Hills
March 03, 2011 2:43 PM
The Culture Secretary’s announcement today concerning the future of Sky News, should a News Corporation takeover of BSkyB go ahead, would radically change the way the news organisation does business.
Sky News PLC will be subject to market scrutiny in a way it hasn’t been in the past.
It would be an independent company with its own board and be listed on the stock market no later than 9 months after a takeover being completed.
At flotation, News Corporation will own 39% of Sky News PLC. The rest of the company will be owned by BSkyB’s existing shareholders.
News Corp will not be allowed to increase its stake (without permission) for 10 years but would, in theory, be able to reduce it. The rest of the shares would also be openly tradable at a price determined by the market, based on demand.
How attractive an investment would Sky News be? Well News Corp has guaranteed existing revenues for 10 years and the new company is free to get out there and pitch for new business.
But Sky News also loses money. Millions of pounds a year. If that is still the case come flotation time, it will inevitably mean Sky News shares are a less attractive a morsel for would-be investors.
Sky News clearly has a value. (Macquarie previously came up with a figure of between 120 – 150 million – although that clearly is out of date). The future worth of Sky News PLC will be determined by the stock market.
One other thing to note:
2 letters published by OFCOM make it clear that the sticking point in discussions with News Corporation was News Corp’s initial refusal to guarantee that the Chairman of Sky News would be independent. News Corp ultimately changed its mind.
The letters also confirm that any of the following will not be allowed to sit as independent directors:
1) Anyone who has been an employee of BSkyB or News Corp in the last 5 years
2) Anyone who in the last 3 year has had a “material business relationship” with News Corp/BSkyB directly or as a partner, shareholder or director of a company that has.
3) Anyone who has close family ties with any of News Corp/BSkyB’s advisers, directors or senior employees.