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Sky Deutschland Boards Advise Investors Against Selling Shares To Sky

Sky Deutschland "advised its investors not to sell their shares to sister pay-TV operator Sky" as part of the latter’s £5B ($8B) European consolidation, according to Henry Mance of the FINANCIAL TIMES. The widely-expected move by Sky Deutschland will not stop the creation of "Sky Europe," as Sky has already agreed to acquire a majority stake in it as well as all of Sky Italia, from Rupert Murdoch’s 21st Century Fox. However, "the recommendation might sow the seeds for future tensions between BSkyB and minority shareholders." Macquarie analyst Guy Peddy said, "There’s always the room for potential issues and frustrations. But both Sky and minorities have the same agenda -- which is to create more value from Sky Deutschland" (FT, 9/17). In N.Y., Mark Scott wrote as part of the deal, Sky "offered to buy the shares of Sky Deutschland’s minority shareholders" for €6.75 ($8.75) each. In a joint statement on Wednesday, the company’s exec and supervisory boards said this offer "does not reflect the full potential and thus intrinsic value of Sky Deutschland’s business." The decision "does not affect the British company’s acquisition of the shares owned by 21st Century Fox" (N.Y. TIMES, 9/17).

NOT A DEAL BREAKER: REUTERS' Harro Ten Wolde wrote Sky said in a statement that "it was aware of Sky Deutschland's position but that the deal was sealed." It said, "There is no minimum acceptance to our offer and we look forward to completing the acquisition of Sky Italia and a majority of Sky Deutschland later this year." Sky Deutschland CEO Brian Sullivan is the only member of the management board who holds shares in the group and he said that "he would not be accepting the offer." Two supervisory board members, Stefan Jentzsch and Harald Roesch, also said that "they would not tender shares they hold." DZ Bank analysts said in a client note, "The management and supervisory board statement fully supports our assessment that the takeover price is too low and does not fully reflect the earnings potential in the company" (REUTERS, 9/17).

PRICE 'INADEQUATE': BLOOMBERG's Rahn & Schweizer wrote some Sky Deutschland shareholders, "including Odey Asset Management LLP and Taube Hodson Stonex Partners," have already said that they consider the €6.75 offer price "inadequate." Odey "declined to comment on Sky Deutschland’s recommendation" on Wednesday. A representative for THS was not immediately available for comment (BLOOMBERG, 9/17). In L.A., Roxborough & Szalai wrote the boards "lauded the strategic value of the planned combination in what BSkyB observers called a key validation of the proposed transaction." Sanford C. Bernstein analyst Claudio Aspesi said, "I think Fox will sell its shares anyway. So, in theory it does not affect the deal. The only question is whether Fox shareholders start agitating and demanding a higher price." Libertum Capital analyst Ian Whittaker similarly said the news was "no surprise" to him. He said Sky offered no real premium "and therefore there was never going to be a realistic chance the company would say yes." He added, "Plus, BSkyB is quite happy not to have to buy out the minority" (HOLLYWOOD REPORTER, 9/17).

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