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2017-06-29 18:57:02
Setback for Murdoch in $15 Billion Sky Takeover

Rupert Murdoch may have to wait another six months to find out whether his long quest to buy Sky will become a reality after British authorities on Thursday asked regulators to further examine 21st Century Fox’s deal for the European satellite giant.

The announcement was part of a split decision on 21st Century Fox’s 11.7 billion pound, or $15 billion, deal to take over the remainder of Sky that it does not already own. The government also ruled that Mr. Murdoch and other company executives were “fit and proper” to hold broadcasting licenses in Britain.

Mr. Murdoch, who is executive chairman of 21st Century Fox, has long tried to cement his legacy by adding Sky to his company’s stable of global media assets. The media mogul hopes to use Sky’s satellite network and online streaming business to keep pace in a world where more consumers watch programming on their mobile devices.

By recommending that Britain’s competition authority carry out a further lengthy, and potentially intrusive, review over what impact the deal would have on Britain’s media landscape, the government has put increased pressure on Mr. Murdoch and his family.

Karen Bradley, the culture minister, said on Thursday that an investigation into the proposed deal had raised questions about whether the takeover would give members of the Murdoch family too much influence.

“The transaction may increase members of the Murdoch Family Trust’s ability to influence the overall news agenda and their ability to influence the political process,” she said in a statement.

But officials also ruled that 21st Century Fox executives would be “fit and proper” to hold broadcasting licenses. That removes uncertainty for the media conglomerate as it looks to end a lengthy sexual harassment scandal at Fox News in the United States.

The company welcomed the British regulator’s “fit and proper” decision, but said it was disappointed the government still had reservations about its potential control of the local media industry. It added that its takeover of Sky may now happen by June 2018.

The company has until July 14 to respond before the government formally refers the deal to Britain’s competition authority.

“It’s both good and bad news for 21st Century Fox,” said Martin Moore, director of the Center for the Study of Media, Communication and Power at King’s College London.

Mr. Moore added that the company would be more comfortable arguing its case to British regulators over questions of its control over parts of the media industry than on whether it should pass the “fit and proper” test.

Investors reacted positively to Thursday’s multifaceted announcement. Shares in Sky rose more than 3 percent after the British government made its ruling.

The deal for the 61 percent of Sky that 21st Century Fox does not already own prompted concerns almost immediately after it was announced in December. Mr. Murdoch has long coveted total ownership of Sky, a satellite broadcaster he founded in the early 1990s. But the media mogul is a divisive figure in Britain, and a previous bid for Sky was withdrawn.

Two politically independent regulators in Britain — the Office of Communications, or Ofcom; and the Competition and Markets Authority — began reviewing the proposed takeover, and attention quickly focused on Ofcom’s investigation, which looked into whether the deal would limit consumer choice and whether 21st Century Fox executives met British broadcasting standards.

Ofcom said in its report that a merged company would control a significant part of Britain’s media landscape, including television, newspaper and online outlets. In response, Fox made concessions to counter those concerns, though the British government — in its separate decision — said that these remedies did not go far enough.

British officials also did not hold back in their criticism of the sexual harassment scandal at Fox News, which, they said, had amounted to “significant corporate failures.”

In its ruling, Ofcom found that the scandals at Fox News had been extremely serious and disturbing, according to its report published on Thursday.

But despite scolding 21st Century Fox, Ofcom passed the company as a “fit and proper” holder of British broadcasting rights. The British regulator added that it had found no evidence that the issues at Fox News had extended through 21st Century Fox, nor that any of the company’s executives were aware of the misconduct before they were informed of it in July 2016.

One lawyer for some of the accusers rejected these claims, saying that 21st Century Fox executives had known about the harassment before that date.

“Fox has represented to Ofcom that no executive director was aware of any allegations of sexual and racial harassment at Fox News prior to July 2016,” Douglas Wigdor, a lawyer representing several current and former Fox News employees who made sexual and racial harassment complaints against the network, said in an email. “I can assure you that the veracity of that statement will be probed in our current litigations.”

In the case of Bill O’Reilly, the former Fox News host, 21st Century Fox repeatedly stood by Mr. O’Reilly even as he faced a series of sexual harassment allegations. The company reached two settlements involving sexual harassment complaints against him in the aftermath of last July’s ouster of Roger Ailes, the former Fox News chief. In addition, the company extended Mr. O’Reilly’s contract this year before he was eventually forced out.

The extended review into 21st Century Fox’s offer comes at a difficult time for the British government, which must eventually decide whether to approve or reject the takeover.

Prime Minister Theresa May was unable to win a majority in parliamentary elections this month, and politicians in Britain are focused on the beginning of negotiations to leave the European Union, leaving little time to consider the proposed takeover. Opposition lawmakers, and even some inside Mrs. May’s Conservative Party, have balked at the deal.

This is not Mr. Murdoch’s first attempt to buy Sky.

He made a previous bid for the satellite giant in late 2010, but was forced to withdraw the offer after a phone-hacking scandal at The News of the World, a British newspaper — since shut down — that was then part of News Corporation, a predecessor to 21st Century Fox.

At the time, British regulators criticized the handling of the scandal by James Murdoch, Rupert Murdoch’s son and then a senior executive at News Corporation, though the authorities eventually cleared Sky as “fit and proper.” James Murdoch is now chairman of Sky and chief executive of 21st Century Fox.

The most recent attempt to buy Sky is part of 21st Century Fox’s efforts to keep pace with digital rivals like Netflix and Amazon, which have used their streaming services to win over consumers increasingly accustomed to watching movies and television programs on mobile devices.

The acquisition of Sky, experts say, would give 21st Century Fox not only a Pan-European satellite network and access to content like the rights to the English Premier League, but also control of Now TV, Sky’s online streaming service.

That could allow 21st Century Fox, which also owns a minority stake in Hulu, to compete with its digital rivals at a time when consumers are forgoing traditional programming to stream content online.