S&P Global on Dec. 9 placed 21st Century Fox Inc.'s corporate credit rating and issue-level rating on CreditWatch with negative implications, following its £10.75 per share nonbinding offer to acquire all of the outstanding shares of Pan-European Pay-TV Operator Sky plc that it does not already own.
While the announcement is not binding and may not result in a deal, S&P believes that there is a significant chance that the deal may go through. "At the announced offer price of £10.75 per share, the total purchase price would be about $15.9 billion at current exchange rates, which we expect that Fox would fund through a combination of cash on hand and incremental debt. Including debt at Sky, Fox's pro forma debt levels would exceed our 3x threshold for the 'BBB+' corporate credit rating," the rating agency said.
In case the companies do not reach a definite agreement, S&P will remove Fox's ratings from CreditWatch. However, in case the companies reach a definite agreement, the rating agency will resolve the CreditWatch placement by evaluating how Fox will finance the transaction along with the long-term leverage prospects of the resulting combined company.
S&P Global Ratings and S&P Global Market Intelligence are owned by S&P Global Inc.