News Corp is likely to have to hike its offer for BSkyB to more than 875 pence per share to win over investors who are ready to test Rupert Murdoch’s nerve over the strategically important asset.
More than nine months after the media tycoon made his initial approach to the pay-TV group, BSkyB shareholders could be in a strong position as News Corp appears to want a quick deal.
“If Rupert sees something he likes he tends to pay up for it,” Peel Hunt analyst Patrick Yau said. “We’ve seen that. But he’ll be cautious of looking like he’s overpaying.”
Forecasts that the UK broadcaster may not always generate as much cash in the future and the fact News Corp is the only buyer are likely to temper estimates of a 950 pence per share take-out price on the 61 percent that News Corp doesn’t already own.
Mr Yau believes a bid of 900 to around 925 could be justified on the basis of historical media multiples and a discounted cash flow valuation.
News Corp, which already owns 39 per cent of the firm it helped build into a highly successful enterprise, was knocked back in June when it bid 700 pence per share for the rest.
BSkyB’s independent directors demanded at least 800 pence but that was before a more than 10 per cent jump in the FTSE 100 index and BSkyB quarterly earnings updates which showed the company operating at a heady rate.
Some analysts suggest News Corp’s agreement to spin off its flagship Sky News channel shows its determination to secure a quick deal, before BSkyB appreciates even further.