TIDM55AD
RNS Number : 2117K
Sky Limited
31 August 2021
31 August 2021
Sky Limited
Post--offer undertakings in relation to the acquisition of Sky
plc ("Sky") by Comcast Corporation ("Comcast") -- report in
compliance with Rule 19.5(h) of the City Code
BACKGROUND
In relation to the acquisition of Sky by Comcast on 9 October
2018 (the "Effective Date"), each of Comcast and Sky has given
post--offer undertakings under Rule 19.5 of the City Code (each a "
Post--Offer Undertaking " and together the " Post--Offer
Undertakings "), full details of which were set out in Part A of an
RIS announcement dated 8 May 2018 (the "POU Announcement"),
relevant extracts from which are attached to this report as
Appendix A.
Pursuant to Rule 19.5(e) of the City Code, each of Comcast and
Sky must comply with the terms of the Post--Offer Undertakings it
has given for the periods of time specified in the Post--Offer
Undertakings and must complete any course of action committed to by
the dates specified in the Post--Offer Undertakings.
This report is provided in accordance with Rule 19.5(h) of the
City Code, pursuant to which Comcast and Sky must submit written
reports to the Panel at such intervals (of not more than 12 months)
as the Panel may require in relation to its compliance with the
Post--Offer Undertakings it has given.
Unless otherwise defined in this report, terms used in this
report shall have the same meanings given to them in the POU
Announcement.
SUBMISSION
Sky--Branded News Service
1. Throughout the period from the Effective Date until 30 June
2021, a member of the Sky Group (alone or with other members of the
Sky Group):
(a) had ownership of, or the right to use, all assets and rights
(including licences) necessary to carry on a Sky--Branded News
Service; and
(b) continued to carry on a Sky--Branded News Service.
2. During the period from 1 July 2020 to 30 June 2021, the total
Sky News Expenditure spent by members of the Sky Group was at least
an amount equal to the Applicable Base Expenditure in respect of
that period.
3. Throughout the period from the Effective Date to 30 June 2021
the Sky Group maintained financial records containing and recording
all items of Sky News Expenditure and the total Sky News
Expenditure in that period.
Sky Group's UK Headquarters at Osterley
4. Throughout the period from the Effective Date to 30 June
2021, the Sky Group maintained its UK headquarters in Osterley,
Greater London, TW7 by Sky occupying one or more buildings in
Osterley, one of which buildings was publicly designated as the Sky
Group's UK headquarters and was the registered office of Sky.
Ownership of Newspapers in the UK
5. Throughout the period from the Effective Date to 30 June
2021, neither Comcast nor Sky nor any of their respective
subsidiaries or subsidiary undertakings directly or indirectly,
whether alone or with or through any third party, held or acquired
(or entered into an agreement, or triggered any obligation, to so
hold or acquire) a majority of the shares or voting rights in, or
the right to appoint or remove a majority of the board of directors
of, any undertaking which carries or carried on a business of
publishing any daily, Sunday or local UK Newspaper.
This report is submitted to the Panel in accordance with
Rule19.5(h) of the City Code and has been approved by the boards of
directors of Sky and Comcast.
APPIX A - POST OFFER UNDERTAKINGS
Comcast and Sky make the following post-offer undertakings
pursuant to Rule 19.5 of the City Code, subject to the
qualification and condition set out below (each of the post-offer
undertakings in paragraphs 1.1(a), 1.1(b), 1.1(c), 1.2, 1.3, 2, 3
and 4 being a "Post-Offer Undertaking" and, together, the
"Post-Offer Undertakings").
1. Sky-Branded News Service
1.1 Comcast undertakes to procure, and Sky undertakes, that:
(a) throughout the period of five years from the Effective Date
or, if longer, from the Effective Date to the date on which the
Post-Offer Undertakings at paragraphs 1.1(b), 1.1(c), 1.2 and 1.3
have been satisfied in full, a member of the Sky Group (alone or
with other members of the Sky Group) shall:
(i) have ownership of, or the right to use, all assets and
rights (including licences) necessary to carry on a Sky-Branded
News Service; and
(ii) continue to carry on a Sky-Branded News Service;
(b) subject to the Post-Offer Undertaking at paragraph 1.1(c),
the total Sky News Expenditure spent by members of the Sky
Group:
(i) during the period from the Effective Date to 30 June 2019
will be at least an amount which, when added to the total Sky News
Expenditure during any period from 1 July 2018 to the Effective
Date, is equal to the Initial Amount, as increased (for the
previous 12 months only) by CPIH as published in July 2018 (or, if
not available in July 2018, the next month in which it is
published) (the Initial Amount so increased being the "First Year
Amount");
(ii) during the period from 1 July 2019 to 30 June 2020 will be
at least an amount equal to the First Year Amount, as increased by
CPIH as published in July 2019 (or, if not available in July 2019,
the next month in which it is published) (such increased amount
being the "Second Year Amount");
(iii) during the period from 1 July 2020 to 30 June 2021 will be
at least an amount equal to the Second Year Amount, as increased by
CPIH as published in July 2020 (or, if not available in July 2020,
the next month in which it is published) (such increased amount
being the "Third Year Amount");
(iv) during the period from 1 July 2021 to 30 June 2022 will be
at least an amount equal to the Third Year Amount, as increased by
CPIH as published in July 2021 (or, if not available in July 2021,
the next month in which it is published) (such increased amount
being the "Fourth Year Amount"); and
(v) during the period from 1 July 2022 to 30 June 2023 will be
at least an amount equal to the Fourth Year Amount, as increased by
CPIH as published in July 2022 (or, if not available in July 2022,
the next month in which it is published) (such increased amount
being the "Final Year Amount"),
each of the First Year Amount, the Second Year Amount, the Third
Year Amount, the Fourth Year Amount and the Final Year Amount being
the "Applicable Base Expenditure" in respect of the relevant
period; and
(c) in the event that the total Sky News Expenditure spent by
members of the Sky Group during the period from 1 July 2018 to 30
June 2019 or any period set out in any of paragraphs 1.1(b)(ii) to
(v) (each such period being an "Expenditure Period") is less than
the Applicable Base Expenditure for that period, the amount of that
shortfall ("Shortfall") shall be spent by members of the Sky Group
as Sky News Expenditure within 6 months of the end of that period
(each such period being a "Shortfall Period") and provided that the
amount of any Sky News Expenditure spent pursuant to this
Post-Offer Undertaking shall not be considered as Sky News
Expenditure spent for the purposes of the Post-Offer Undertaking at
paragraph 1.1(b) during the Expenditure Period following that in
which the Shortfall arose.
1.2 Comcast undertakes to procure, and Sky undertakes, that
throughout each Expenditure Period and from 1 July 2023 to 31
December 2023, the Sky Group shall maintain financial records
containing and recording all items of Sky News Expenditure and the
total Sky News Expenditure in each such period.
1.3 Comcast undertakes that it shall make available to Sky such
funding as may be necessary to enable Sky to satisfy the Post-Offer
Undertaking at paragraph 1.1(c) irrespective of Comcast's level (if
any) of ownership of or control over Sky.
(Paragraphs 1.1(a), 1.1(b), 1.1(c), 1.2 and 1.3 together being
the "Sky News Post-Offer Undertakings").
1.4 For the purposes of the Sky News Post-Offer Undertakings:
(a) "CPIH" means the annual consumer prices index rate,
including a measure of owner occupiers' housing costs, as published
by the Office for National Statistics (or any successor);
(b) "Indirect Costs Cap" means in respect of an Expenditure
Period (and including any related Shortfall Period) an amount equal
to 30 per cent. of the Applicable Base Expenditure for that
Expenditure Period;
(c) "Initial Amount" means the amount of the total Sky News
Expenditure for the period from 1 July 2016 to 30 June 2017 (see
Note 1);
(d) "Relevant Costs" means:
(i) the direct costs relating to:
(A) headcount: the cost of all permanent staff and freelancers
working directly on the provision of a Sky-Branded News Service
(including presenters, reporters, producers, editors and
cameramen);
(B) coverage/newsgathering: daily newsgathering costs (e.g.
travel, accommodation and feeds), large story spend (e.g.
referenda, elections), newsgathering contract costs (e.g. The
Associated Press) and satellite truck maintenance and operational
costs;
(C) production, studio and archive: all production and studio
costs (headcount, equipment and storage) and operational spend,
news archive costs, and foreign bureau rent and office costs;
(D) Sky News International: transponder, marketing, and
headcount costs for Sky News International;
(E) digital: headcount costs for digital team and associated
contracts;
(F) radio: headcount costs for radio journalists and costs of
associated radio contracts; and
(G) channel management: headcount costs for direct channel
management of a Sky-Branded News Service including the Head of a
Sky-Branded News Service; and
(ii) subject to (iii) below, the indirect costs relating to:
(A) satellite and digital terrestrial television (Freeview) and
other capacity: an allocation to a Sky-Branded News Service of: (i)
total satellite capacity costs; (ii) total Freeview capacity costs;
and (iii) related headcount costs;
(B) music licence fees: an allocation to a Sky-Branded News
Service of total music licence costs;
(C) creative services: headcount costs of the graphics team
working for, and an allocation of creative agency and promotional
costs to, a Sky-Branded News Service;
(D) corporate overhead and functional information technology and
human resources: an allocation to a Sky-Branded News Service of:
(i) corporate headcount support comprising headcount from Sky's
legal, finance, human resources and public affairs departments; and
(ii) information technology and human resources support costs (e.g.
laptop support); and
(E) capital expenditure depreciations: capital expenditure
depreciation on the capital assets directly employed for the
purposes of the provision of a Sky-Branded News Service, comprising
news gathering and operational equipment (e.g. cameras and SIS
trucks),
but, in each case, excluding indirect costs relating to property
and facilities shared with other businesses (not being a
Sky-Branded News Service) of the Sky Group (including rates and
rent for buildings from which a Sky-Branded News Service operates),
marketing (including advertising), equipment support and broadcast
operations (i.e. the headcount and equipment costs relating to the
ingest and playout of audio-visual content).
(iii) If and to the extent that indirect costs in any
Expenditure Period (including any related Shortfall Period) exceeds
the Indirect Costs Cap for that period, the total amount of any
indirect costs for that Expenditure Period (including any related
Shortfall Period) shall be deemed to be equal to the Indirect Costs
Cap.
(e) "Sky-Branded News Service" means a 24-hour news and current
affairs service comprising television news channels (and which may
also include related digital and radio services) that is
distributed to an audience in the United Kingdom (although it may
also be received internationally) that:
(i) is made available under a brand which incorporates the word
"Sky" (and may include the brands "Sky News" and "Sky News HD");
and
(ii) may be made available on a free to air or a charged
(including a subscription) basis; but
(iii) does not include Sky Sports News.
(f) "Sky News Expenditure" means expenditure by members of the
Sky Group (excluding any expenditure between such members) on
Relevant Costs incurred on a basis which is consistent with Sky's
previous accounting policies and methodology for the purposes of
carrying on a Sky-Branded News Service;
(g) "Sky News International" means a version or versions of a
Sky-Branded News Service distributed to an audience outside of the
UK; and
(h) "Sky Sports News" means a news service with a majority of
its content focussed on sports related news.
1.5 For the purposes of the Sky News Post-Offer Undertakings, a
certification by the Supervisor as to any of the following:
(a) whether or not expenditure constitutes:
(i) Sky News Expenditure;
(ii) expenditure by members of the Sky Group; and
(iii) expenditure during a period; and
(b) what amount constitutes:
(i) the Initial Amount; and
(ii) Shortfall,
shall be final and conclusive and binding on Comcast and
Sky.
Note 1: The Initial Amount is commercially sensitive and a
figure is therefore not included in this announcement. It will,
however, be certified by the Supervisor.
2. Sky Group's UK Headquarters at Osterley
Throughout the period of five years from the Effective Date,
Comcast undertakes to procure, and Sky undertakes, that the Sky
Group shall maintain its UK headquarters in Osterley, Greater
London, TW7 by Sky occupying one or more buildings in Osterley, one
of which buildings shall be publicly designated as the Sky Group's
UK headquarters and be the registered office of Sky.
3. Ownership of Newspapers in the UK
Throughout the period of five years from the Effective Date:
(a) Comcast undertakes that neither Comcast nor any of its
subsidiaries or subsidiary undertakings shall; and
(b) Comcast undertakes to procure, and Sky undertakes, that
neither Sky nor any of Sky's subsidiaries or subsidiary
undertakings shall,
in each case, directly or indirectly, whether alone or with or
through any third party, hold or acquire (or enter into any
agreement, or trigger any obligation, to so hold or acquire) a
majority of the shares or voting rights in, or the right to appoint
or remove a majority of the board of directors of, any undertaking
which carries on a business of publishing any daily, Sunday or
local UK Newspaper (the "UK Newspaper Post-Offer Undertaking").
For the purposes of the UK Newspaper Post-Offer Undertaking, "UK
Newspaper" means a printed newspaper publication, the majority of
the content (excluding advertisements) of which consists of news
reports related to public and current affairs and other
journalistic content, published at intervals of not more than 7
days and distributed wholly or primarily either nationally
throughout the UK or in a specific local area of the UK (and which
may also be made available in digital form) but excluding a
publication which is made available only in digital form.
4. Sky News Board
Each of Comcast and Sky undertakes to procure that, no later
than three months after the Effective Date, the Sky Group shall
establish an "editorial board" for the Sky-Branded News Service by
Sky UK Limited (or, alternatively, any other member of the Sky
Group that, as at the date on which the "editorial board" is so
established, holds the relevant licence(s) for a Sky-Branded News
Service):
(a) designating and appointing no fewer than three individuals
to an "editorial board", such designation and appointment to be
considered satisfied when announced via a RIS; and
(b) publishing the terms of reference of that "editorial board" on a website.
Qualification and Condition
Subject to consulting the Panel in advance and obtaining the
Panel's consent to rely on such qualification or condition pursuant
to Rule 19.5(f) of the City Code, a Post-Offer Undertaking will no
longer apply if and to the extent that the Panel determines that
Comcast or Sky (as the case may be) is unable to comply with that
Post-Offer Undertaking as a result of an event, act or circumstance
beyond the control of Comcast or Sky (as the case may be).
Definitions and Interpretation
The following definitions and interpretations also apply for the
purposes of Part A of this announcement and the Post-Offer
Undertakings:
"City Code" means the City Code on Takeovers and Mergers;
"Comcast" means Comcast Corporation, a company incorporated
in Pennsylvania with its registered office
in One Comcast Center, Philadelphia, PA 19103;
---------------------------------------------------
"Effective Date" means the date on which the Offer becomes
or is declared unconditional in all respects;
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"Offer" means the offer by Comcast for the entire
issued share capital of Sky to be made following
Comcast's announcement of its firm intention
to make an offer on 25 April 2018;
---------------------------------------------------
"Panel" means the UK Panel on Takeovers and Mergers;
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"procure" includes taking, continuing to take and preserving
the ability to take steps to secure a relevant
outcome, including (without prejudice to
the aforesaid) by obtaining from any person
or entity enforceable obligations and commitments
to act and enforcing such obligations and
commitments; and, for the avoidance of doubt,
a Post-Offer Undertaking by Comcast to "procure"
shall subsist and continue in full force
and effect irrespective of Comcast's level
(if any) of ownership of or control over
Sky;
---------------------------------------------------
"right to appoint shall be construed in accordance with Schedule
or remove a majority 6 of the Companies Act 2006;
of the board of
directors"
---------------------------------------------------
"RIS" has the meaning given in the City Code;
---------------------------------------------------
"Sky" means Sky plc, a company incorporated in
England and Wales with registered number
02247735;
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"Sky Group" means Sky and its subsidiaries and subsidiary
undertakings from time to time;
---------------------------------------------------
"Sky UK Limited" means Sky UK Limited, a company incorporated
in England and Wales with registered number
02906991;
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"subsidiary" has the meaning given in Section 1159 of
the Companies Act 2006;
---------------------------------------------------
"subsidiary undertaking" has the meaning given in Section 1162 of
the Companies Act 2006;
---------------------------------------------------
"Supervisor" means Grant Thornton UK LLP;
---------------------------------------------------
"UK" means the United Kingdom of Great Britain
and Northern Ireland;
---------------------------------------------------
"undertaking" has the meaning given in Section 1161 of
the Companies Act 2006; and
---------------------------------------------------
"voting rights" shall be construed in accordance with Schedule
6 of the Companies Act 2006.
---------------------------------------------------
Further information regarding the Post-Offer Undertakings
The Post-Offer Undertakings set out in Part A of this
announcement are in a form acceptable to the Panel, are legally
binding commitments and, should the Effective Date occur, each of
Comcast and Sky must comply with the terms of its respective
Post-Offer Undertakings and complete any courses of action
committed to within the relevant time periods set out.
Comcast and Sky have each appointed the Supervisor to monitor
its compliance with the Post-Offer Undertakings it has given. In
respect of its appointment, the Supervisor has agreed a work-plan
with the Panel in order to monitor compliance by each of Comcast
and Sky with the Post-Offer Undertakings it has given.
Comcast, Sky and the Supervisor will be required to submit
periodic reports to the Panel, in accordance with the provisions of
Rule 19.5(h) and (i) of the City Code, in respect of the Post-Offer
Undertakings.
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END
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