SKY Dividends

[CaledoniaMan]

I'm pretty much a lurker here but I have a HYP portfolio with a lot of the usual culprits including SKY which of course is the the subject of the 21st Century Fox bid valuing the company at £10.75 a share.

I was surprised back in January to receive no half yearly dividend announcement and then realised that the 21st Century Fox offer had a clause in it that precluded the payment of any dividends in 2017.

The exact wording from the recommendation document is below.

21st Century Fox currently anticipates that the Acquisition will complete before the end of 2017.
Under the terms of the Acquisition, if the Effective Date has not occurred on or before 31 December
2017, Sky Shareholders shall be entitled to receive a special dividend of 10 pence per Sky Share,
payable in 2018.

 In addition, Sky Shareholders shall be entitled to receive any dividend declared and paid by Sky in
the ordinary course in 2018 and prior to the Effective Date. The price of £10.75 per Sky Share shall
be reduced to the extent that:

 the dividend in respect of the six months ending 31 December 2017 exceeds 13.06 pence per
Sky Share; and

 the dividend in respect of the year ending 30 June 2018 exceeds 21.8 pence per Sky Share.

 Sky will not pay any dividends in 2017.


https://corporate.sky.com/documents/21cf/sky-21cf-rule-2-7.pdf


So in summary the shareholders net position is £10.75/share if the deal is completed before 31 Dec 2017. If later then a special dividend of 10p with a possible 13.06p/share for 2017 earnings and 21.8p/share for 2018 if the sale hasn't been concluded by those dates any dividend payments in excess of these comes off the offer price

To put this in some context last year shareholders received 33.5p/share total dividend.
This year Digital Look is forecasting the dividend to be 34.13p

Presumably the thinking is that the premium paid in the £10.75 compared with the share price at the time of the offer covers for the 33/34p dividends expected in April & October 2017. It does stick in my throat a bit that profits made in 2017, while the company still belongs to its existing shareholders, are not being shared directly through dividends. with the shareholder. In theory if Sky was to have a spectacular 2017 and was able to increase its dividend, the current shareholders would not see any benefit from this. The offer values the company net of 2017 dividends at something like £10.42/share, a price it was last at back at the beginning of 2016.

It seems to me to be poor offer for a company with growing revenues and ability to make these sorts of profits.

Clearly the market has some doubts that this will get through the remaining hurdles which I understand include the UK Media Regulatory Authority and the UK government with the share price being 981p as I type. If it does go through I heard a Bloomberg analyst mention there might be room for a slightly increased offer if they dont get the 75% shareholder approval.

If the UK government approve the deal then we can immediately expect to see the share price increase to 1075p, hopefully the shareholders will then look for a better offer.

I would be interested to hear others view on this and what they feel about the dividend situation.

Cal