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NEW YORK/MADRID (Reuters Breakingviews) - The Murdochs are having another shot at Sky. Twenty-First Century Fox has offered to buy the 61 percent of the European pay-TV group it doesn't own. The proposal notionally values Sky at 18.5 billion pounds, though only about 11.3 billion pounds would change hands. Circumstances look a lot more auspicious than the last time Rupert Murdoch and his family tried to consolidate the business in 2010.
Back then, a phone-hacking scandal at publications owned by News Corp, which then held the Sky stake, helped doom the attempt and it was abandoned the following summer. Questions regarding plans for Sky have swirled since then. Fox sold its stakes in Sky Italia and Sky Deutschland back to Sky in 2014. Then Fox Chief Executive James Murdoch returned as chairman of Sky.
By July this year, as Breakingviews noted, signs were emerging that another tilt at Sky might be coming. For one thing, the pay-TV operator's shares had steadily declined since the start of the year, making it look increasingly cheap. By Thursday, they were down nearly 30 percent.
The 10.75 pounds-per-share bid values the Sky enterprise at a bit under 12 times estimated 2017 EBITDA. The offer is still below where the shares started the year. But investors were not buying Sky's growth story, despite a recent day of presentations and the launch of new mobile services in the UK. And a 40 percent premium to the undisturbed price is hardly stingy.
For Fox, fully owning Sky would simplify its operating model, a big initiative under James Murdoch. It also gives the media and entertainment conglomerate direct access to consumers, helping Fox compete as more people sign up for video-streaming rivals like Netflix.
Much has changed since 2010. Fox has spun off its newspapers, distancing itself from the earlier scandal. Media firms and content distributors are rapidly consolidating around the world, as shown by AT&T's plan - after already acquiring DirecTV - to buy Time Warner. Though there could still be concerns about the Murdochs' excessive influence, the political environment in the UK is less hostile. Politicians may be distracted by Brexit preparations, too. The terms of the deal still have to be finalized, but Fox's latest reach for Sky looks well timed.
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