Rupert Murdoch will be smiling. A possible referral of the Sky bid to the competition authorities is a setback, but the overall plot is moving perfectly satisfactorily from his point of view. Soon he may be in the familiar position of haggling over fine details, such as the future of Sky News. In a negotiation with regulators and politicians, Murdoch usually finds a way to get a deal done.
One outside risk to 21st Century Fox’s ambitions has been removed completely. Media regulator Ofcom looked at the sexual harassment scandals at Fox News in the US and decided they are not a problem, takeover-wise. The allegations amount to “significant corporate failure” but Sky would still be a fit and proper organisation to hold a broadcast licence under 100% ownership by Fox.
That outcome was expected since the regulatory threshold for removing a broadcast licence is high (Owen Oyston, who did suffer the sanction, was convicted of rape) and it would be a brave regulator that deprived the punters of live football, even temporarily.
Culture secretary Karen Bradley is instead minded to refer the deal to the Competition and Markets Authority on grounds of media plurality – essentially the fact that Murdoch interests in the UK already span broadcast, radio, print and online. A full takeover of Sky, from Fox’s current holding of 39%, might increase the Murdochs’ ability to “influence the overall news agenda” and “the political process”.
That sounds like a serious risk to the deal, but probably isn’t. Murdoch’s initial attempt to head off a competition investigation was a pledge to fund Sky News for five years and give the channel a separate editorial board. It was rejected by Bradley because it merely “mitigated” the risks, rather than removed then, but Murdoch is free to try again in the next fortnight. He probably will. His first offer is rarely his best.
Back in 2011, before the original bid was scuppered by the phone-hacking scandal, Murdoch was willing to spin off Sky News as a separately listed public company. It’s not obvious that same structure would be accepted this time because Ofcom, for one, is worried about the ability of loss-making Sky News to survive outside the family. But giving Sky News 10 years of funding, and beefing up the editorial safeguards, might work. Even on the opening offer, Ofcom reckons the proposed editorial board for Sky would be “more robust” than arrangements at the Murdoch-owned Times and Dow Jones, which are widely derided as utterly flimsy.
If Bradley still isn’t persuaded – or if Fox does nothing – then the CMA really will be called into action. But one suspects Murdoch would still fancy his chances of success. The CMA could even clear the deal outright and demand no undertakings at all on Sky News. An investigation would take six months, which introduces the risk of events intervening (another general election and a Labour government?), but that’s life.
The stock market cut to the chase. Sky’s share price rose 3%. At 988p, or only 8% below the £10.75 bid price, it is saying the takeover – even if you loathe it – is still very likely to happen in the end.
Burberry cheques in focus again
For a FTSE 100 company to lose one vote on pay is embarrassing. To lose two would look like its board has learned nothing and takes its shareholders for mugs. For Burberry, and chairman Sir John Peace, the danger is real.
In 2014, 53% of shareholders voted against a remuneration report that included a £15m award of shares to chief executive Christopher Bailey. Now two big proxy voting agencies are advising shareholders to vote against this year’s version.
Glass Lewis is still worried about that 2014 award, arguing that Burberry doesn’t explain itself properly when it decides what proportion should vest. ISS seems to agree (it calls the performance conditions “murky”) but its primary objection is that Burberry over-cooked its calculation of a buy-out award for incoming finance chief Julie Brown when she was hired from Smith & Nephew.
The risk of a defeat has sent Burberry into a fine frenzy. Peace and remuneration chair Fabiola Arredondo are lobbying shareholders furiously for support ahead of the annual meeting in a fortnight. Brown has surrendered half her award and the company has issued a note attempting to shed light on how it judges Bailey’s performance.
The deeper problem may not be the points raised by ISS and Glass Lewis but Burberry’s record of showering its executives, especially Bailey, with vast sums. Peace, after 13 years in the chair, should know the drill: if he loses a second vote, he should accelerate a retirement currently vaguely scheduled for sometime before the end of next year.
