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Fox, Sky agree to £11.7B takeover deal

21st Century Fox Inc. and Sky plc have agreed the terms of a recommended pre-conditional cash offer, which represents a value of about £11.7 billion, for the fully diluted share capital of the European pay TV operator that Fox does not own.

The company said Dec. 15 that it expects the deal to close before the end of 2017. If the effective date has not occurred on or before Dec. 31, 2017, Sky shareholders shall be entitled to receive a special dividend of 10 pence per Sky share, payable in 2018.

The price of £10.75 per Sky share shall be reduced to the extent that the dividend in respect of the six months ending Dec. 31, 2017, exceeds 13.06 pence per Sky share; and the dividend in respect of the year ending June 30, 2018, exceeds 21.8 pence per Sky share. Sky will not pay any dividends in 2017.

The British broadcaster's independent committee intends to unanimously recommend that unaffiliated Sky shareholders vote in favor of the deal. The deal is subject to a number of pre-conditions and conditions, including the receipt of regulatory approvals and the approval of Sky's shareholders.

Under a co-operation agreement between the companies, Fox will have to pay a deal termination fee of £200 million if the company fails to obtain regulatory approvals before the longstop date.

Further, Fox and its unit 21st Century Fox America Inc. secured up to £12.2 billion in financing for the deal under a bridge credit agreement with Goldman Sachs Bank USA, Deutsche Bank Securities Inc. and JPMorgan Chase Bank NA as joint lead arrangers and joint book runners.

The price of £10.75 per Sky share represents a premium of about 40% to the closing price of £7.69 per Sky share on Dec. 6, the last business day before the date on which an initial proposal was made; a premium of about 36% to the closing price of £7.90 per Sky share on Dec. 8, the last business day before the start of the offer period; and a multiple of about 11.4 times Sky's adjusted earnings before interest, tax, depreciation and amortization of £2.18 billion for the 12-month period ended June 30.