Shares in Sky spike after report of rebuffed Vivendi approach

Shares in Sky spiked by about 5% yesterday after the Sunday Telegraph reported that 21^st Century Fox had rejected offers by Vivendi and Vodafone to acquire its 39% stake in the European pay TV operator.

According to the paper, citing unnamed City sources, Vivendi made the most recent approach, with informal discussions held between Vivendi chairman Vincent Bolloré and the Murdoch family in the spring. However, discussions foundered on the Murdochs’ demand that Vivendi pay £18 (€25) a share for Fox’s stake, a 73% premium on its price last week, according to the Sunday Telegraph.

The paper also reported that Vodafone made an informal approach to take over Sky last year, but did not pursue the matter after receiving a similar price demand.

The Sunday Telegraph suggested that news of the bids combined with James Murdoch’s recent appointment as chief executive of 21^st Century Fox, and the election of a Conservative government in the UK, could revive the possibility of a bid by Fox itself for the rest of Sky.

Analysts at Liberum maintained a sell recommendation on Sky’s stock in a note sent to investors on Monday. Liberum believes that 21^st Century Fox’s rejection of Vivendi’s bid over price means that Fox is less, rather than more, likely to buy the part of Sky that it does not already own as it would have to put forward a bid that matches or exceeds the £18 per share it reportedly held out for from the French media giant in order to satisfy investors. Liberum’s note argued that there is a potential downside of over 50% on Sky’s current price.