O’Reilly’s loss is Sky’s gain as shares reach highest in a month


  • Business
  • Saturday, 22 Apr 2017

AS Bill O’Reilly’s stock fell this month, shares in Sky Plc were rising.

Sky closed at 984 pence in London on Thursday, the highest in almost a month, as UK traders absorbed the news that Rupert Murdoch’s 21st Century Fox Inc had cut ties with its most popular and highest-rated TV personality.

O’Reilly’s departure under the cloud of sexual harassment allegations helps neutralise the most explosive issue that’s arisen since Fox agreed to buy the rest of the European payTV company. The decision to let O’Reilly go gives UK regulators reviewing the deal that much less to work with should they decide to delve into the Murdoch family’s handling of sexual harassment complaints at Fox News.

Sky stock initially fell after the New York Times reported on April 1 that Fox and O’Reilly had paid a total of US$13mil to settle lawsuits from five women who made allegations against him. At its lowest on April 6, the stock closed at a 10.5% discount to Sky’s offer of 1,075 pence a share, after dozens of advertisers said they would boycott “The O’Reilly Factor” on Fox News.

Since then, amid speculation that the Murdochs would sever ties with their star commentator, shares of Sky have climbed in six of the past eight sessions. The turnaround came on April 7, the day the European Union cleared the £11.2bil (US$14.4bil) merger on competition issues.

“The stock sank when the sex harassment allegations broke and is recovering due to O’Reilly getting fired and quite decent results from Sky,” says Claire Enders, founder of research firm Enders Analysis. In its nine-month earnings report Thursday, Sky reported a 5% increase in sales from a year earlier, adjusted for currency fluctuations, despite weakness in the UK ad market.

The EU clearance is probably a bigger factor in Sky’s share rise, says Stephane Beyazian, an analyst at Raymond James in London, though moving past the O’Reilly issues is also positive for the deal.

“It does help, albeit I believe it’s a small, small, small help,” he says.

The deal’s next regulatory hurdle is a report from UK communications watchdog Ofcom on whether Fox’s takeover of Sky raises public-interest concerns and whether Sky would continue to be a “fit and proper’’ holder of a broadcast licence following the purchase. That report is due next month.

Ofcom declared Sky a “fit and proper” holder in 2012, but expressed reservations about corporate governance failures by 21st Century Fox chief executive officer James Murdoch while he was executive chairman of News Corp’s News International unit, during a phone-hacking crisis at the company’s newspapers. James had stepped down as chairman of Sky in 2012, becoming a non-executive director in the wake of the scandal, and returned as chairman in 2016.

Sky CEO Jeremy Darroch declined to comment on the O’Reilly controversy during an earnings call Thursday, and Fox declined to comment as well. While investors may be growing more confident the Sky deal will pass muster with regulators, Enders says it’s possible officials will heavily scrutinise Fox’s handling of sexual harassment complaints by employees, even after O’Reilly’s ouster and the exit of Fox News president Roger Ailes last year amid similar allegations.

“Two sex discrimination scandals in less than a year doesn’t sound like a good corporate governance pattern regardless of the obvious business issues,” she says. – Bloomberg

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