Media giant 21st Century Fox tables takeover bid for Sky
Rupert Murdoch's 21st Century Fox has tabled a takeover bid for Sky, valuing the broadcaster at £18.7 billion.
In a stock market announcement, the two firms said they had reached an agreement on a cash offer of £10.75 per share, but stressed that there was no certainty that a deal would be struck.
News of the potential deal sent shares in the Game of Thrones broadcaster rocketing, closing up 26% on the London Stock Exchange.
The independent directors of Sky said they have agreed to recommend the takeover approach to shareholders.
21st Century Fox, which owns 39% of Sky, said the offer represented a 40% premium of Sky's share price on Tuesday. Including all debt, the deal values Sky at £25.3 billion.
In an email to Sky's workforce, chief executive Jeremy Darroch said the proposal marked "the first step in what will now be a formal process over the coming weeks".
"As you know, 21st Century Fox were the founders of our business and have always been an extremely supportive shareholder and backer of Sky. Many of us have worked closely with them over the years and know them very well," he added.
Rumours had been mounting that Rupert Murdoch would make a fresh swoop for the UK-based satellite broadcaster after his attempt to launch a takeover through News Corporation was thwarted in 2011.
The company - which owns The Sun and The Times - was forced to abandon its plans after becoming embroiled in the phone-hacking scandal involving News International.
News Corp's bid faced opposition from rivals in the media industry and some politicians before it was scuppered by acute pressure on the company brought about by phone-hacking claims .
Speculation that a bid could resurface began to bubble up again in January when the media mogul's son, James Murdoch, took up the role as chairman of Sky.
James Murdoch had previously held the position as Sky's chief executive between 2003 and 2007, but was forced to resign as the Murdoch empire became engulfed by public outrage at reports of phone-hacking at the Murdoch-owned News of the World newspaper.
Vince Cable, who was the Liberal Democrat business secretary at the time of the 2010 bid, said the new offer posed a genuine threat to media plurality in the UK.
He added: "The level of plurality in UK media has remained comparable since I referred a similar takeover bid to the competitions authorities in 2010.
"Nothing seems to have materially changed and if this takeover was to go ahead then there would be similar concerns raised about media plurality in the UK.
"The way Theresa May's government deals with this is a test of their independence from the influence of large proprietors."
Sterling's 16% plunge against the US dollar in the wake of the Brexit vote has made UK firms prime takeover targets for international companies.
Sky, which has 20 million customers across five countries, announced in October that sales rose 5% in the first quarter, driven by growth in Germany and Austria.
UK revenues grew 5% to £2.1 billion and group sales were up 7% to £3.1 billion on a constant currency basis.
Labour's deputy leader Tom Watson said a fresh bid for Sky has been on the cards ever since Rupert Murdoch withdrew his offer in 2011.
"If the independent committee set up by the board of Sky agrees to accept the offer from 21st Century Fox it will be incumbent on the regulatory authorities, including Ofcom, to ensure that media plurality is upheld and that competition concerns are addressed.
"The bid must also be judged on its likely impact on the UK news market and the provision of robust and independent journalism.
"Finally, given the likely concentration of further media power in the hands of a single company, it is right that the fit and proper test should be applied by Ofcom if the deal is approved by Sky shareholders."