As expected, 21st Century Fox said Friday that it would sell its interests in European satellite companies Sky Italia and Sky Deutschland to British Sky Broadcasting Group, in a deal valued at $9.3 billion, including a hefty cash component that could help fuel another bid for Time Warner Inc.
Analysts have expected Fox to sell the European assets to BSkyB, of which it owns 39% -- for months. With the deal, Fox also receives $8.6 billion in cash ($7.2 billion after taxes), money that could be used to beef up another bid for Time Warner. Fox had made an $80 billion offer for Time Warner in June, which was rejected as too low.
That deal involved about $35 per share in cash and $50 per share in non-voting Fox stock.
With the additional funds, Fox could theoretically increase the cash component by as much as $8 per share without having to increase its leverage ratio.
Time Warner shares were up slightly on the news – they rose 1% (96 cents each) to $84.97 each in early trading July 25.
Fox has been said to be fiercely protective of its investment grade debt rating.
In announcing the deal, Fox said it still intends to continue its previously announced share repurchase program. In a statement, Fox chairman and CEO Rupert Murdoch said that repurchase program will go on regardless of any other activity at the parent company.
"Our renewed authorization for our share buyback program will be executed regardless of any potential acquisition or investment activity by the company," Rupert Murdoch said in a statement. "21st Century Fox's number one priority is increasing shareholder value in a disciplined manner and, as a result, we will only consider transactions that fully support this objective."
In the end, Fox will transfer its 100% interest in Sky Italia and its 57.4% stake in Sky Deutschland to BSkyB. In return, Fox will receive the cash and will participate in a previously announced BSkyB equity offering, purchasing about $900 million in additional BSkyB shares to keep its stake at 39.1%. The deal will create a Pan-European satellite giant with about 20 million customers in Germany, Italy, Austria, the United Kingdom and Ireland.
"We have always believed that a combination of the European Skys would create enormous benefits for the combined business and for our shareholders," said Fox co-chief operating officer James Murdoch in a statement. "Ultimately, a pan-European Sky is good for customers, who will benefit from the accelerated technological innovation and enhanced customer experience made possible by a fully integrated business."