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BskyB shares up after News Corp 700p buy-out proposal

Published: 17:18 15 Jun 2010 AEST

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Shares in Britain’s largest sUBScription TV and media group, British Sky Broadcasting Group (LON:BSY) (BSkyB) jumped over 20% on the London Stock Exchange, to trade as high as 732p, after the company revealed that its largest shareholder, News Corp (NASDAQ:NWSA), has proposed to buy out the company’s remaining shares.

The independent BskyB directors rejected the proposal, however it has entered into an agreement which may pave the way to a deal.

Rupert Murdoch’s international media conglomerate, News Corp currently owns 39% of BskyB, and on 10 June 2010 it made a proposal to acquire the remaining 61% for 675p per share. BskyB subsequently rejected the offer, and now News Corp upped the value of the proposal to 700p.

“Based on careful review and advice, it is the unanimous view of the independent directors that there is a significant gap between the proposal from News Corporation and the value of the company”, BSkyB's senior independent non-executive director Nicholas Ferguson said.

The independent directors, advised by Morgan Stanley and UBS, said that they unanimously consider that the proposal significantly undervalues the company, and they would not recommend an offer at 700p if it was made today. However, they would have been prepared to support a proposal which would deliver value in excess of 800p.

The independent directors did however acknowledge that “an offer from News Corporation could be in the interests of BSkyB shareholders in the future”. Consequently, BskyB has agreed to co-operate with News Corp, to obtain the necessary merger clearances, which would facilitate a News Corp takeover in the future.

In a separate statement, News Corp highlighted that its “increased proposal represents both an attractive valuation at approximately 11.8 times EBITDA for the twelve months to 31 March 2010 and a premium of 27.5% over BSkyB's average share price for the last twelve months.”

According to the global media giant, the proposal presents an opportunity to consolidate a core business, and it will increase the geographic diversification of its earnings base, reducing exposure to cyclical advertising revenues and increase its direct consumer subscription revenues.

"We believe that this is the right time for BSkyB to become a wholly-owned part of News Corporation with its greater scale and broader geographic reach”, News Corp deputy chairman, president and COO Chase Carey commented. "However, we are taking a disciplined approach to this transaction, recognising both the market valuation of BSkyB and our substantial existing ownership.”

Rupert Murdoch’s owns the major television and movie studio’s the Fox Broadcasting company and 20th Century Fox, as well as several major print media companies including the New York Post, Dow Jones, The Wall Street Journal and News International - the parent company of The Sun, The News of the World and The Times.

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