London: Rupert Murdoch's News Corp says the £7.8 billion (Dh42 billion) bid for British Sky Broadcasting is "full and fair". Investors and analysts say even a 14 per cent increase would be the "bare minimum."
BSkyB, the UK's biggest pay-TV operator, last week rejected the 700 pence a share offer and said it wanted at least 800 pence. Faced with pressure from News Corp to buy the 61 per cent it doesn't already own, investors should fight for a higher bid, said David Stewart, chief executive officer at Odey Asset Management in London
Cash flow
"The Murdochs share the same belief as we do, that there is significant cash flow to be generated from this company and that cash flow isn't yet reflected in the price," Stewart said. Odey owns about 3 per cent of BSkyB shares, he said.
BSkyB's independent directors, led by Nicholas Ferguson, chairman of SVG Capital, said they may accept an offer of more than 800 pence a share. There is a "significant gap" between News Corp's proposal and the value of the company, Ferguson said last week.
Analysts at Citigroup Inc., Investec, Macquarie Securities, Numis Securities, Sanford C. Bernstein and Singer Capital Markets named figures between 750 pence to 860 pence as a potentially acceptable price per share for shareholders.
"Investors will stick to their guns on 800 pence," said Singer Capital Markets analyst Johnathan Barrett. "It very much is a bare minimum; I think we'd really want a chunk more than that." News Corp.'s offer of 700p was 17 per cent more than BSkyB's closing price on June 14, the day before the bid was announced.
Unchanged
The shares, which climbed as high as 1,660 pence in March 2000, were unchanged at 699 pence at 8.38am in London yesterday.
The value of News Corp.'s BSkyB holding has more than doubled since the London-based company's initial public offering on December 8, 1994. The shares have also outperformed those of News Corp., which dropped by about a fifth in the last five years. In contrast, BSkyB shares rose 18 per cent, not including the gain after News Corp.'s offer.
BSkyB said its free cash flow increased 17 per cent to £310 million in the nine months ended March 31.
