Comcast has jumped into the fray for Sky, challenging Rupert Murdoch’s 21 Century Fox and Walt Disney Co with a cash offer valuing the business at £22.1bn (R358bn) and opening the possibility of a bidding contest for the UK’s biggest pay-television company.
After months spent scoping out Sky’s technology platform and content proposition of sports and entertainment across five countries, the owner of NBCUniversal offered £12.50 per Sky share on Tuesday. That exceeds the £10.75 offered by Fox for the 61% stake it doesn’t already own in the European broadcaster by about 16%.
Comcast sprung the offer on Sky on Tuesday morning, its timing suggesting it sees an opening to win over UK officials and investors. Fox has been struggling to secure regulatory approval for its bid and some Sky holders have been agitating for a better offer after Disney’s US$52.4bn agreement in December to buy most of Fox’s film and TV assets, including its stake in Sky. Fox would hand full control of Sky to Disney if its takeover is successful.
Fox will be furious after Comcast’s bid, said Crispin Odey, Murdoch’s former son-in-law and founder of hedge fund manager Odey Asset Management, which owns a 0.8% stake in Sky according to data compiled by Bloomberg. “This is tanks on their lawn,” said Odey, who has been pushing for a higher offer for Sky.
Sky shares rose as much as 20% to 1 323.50p, higher than both bids and the most since Fox’s offer in December 2016.
Given the strategic importance of Sky to Fox and Disney, a counteroffer well above Comcast’s is now very likely, said Jerry Dellis, an analyst at Jefferies in London. Disney CEO Bob Iger called Sky a “crown jewel” among Fox assets in a December interview with Bloomberg TV.
“It’s obviously a huge gauntlet that’s been laid down to the Murdochs in relation to their pre-existing offer,” said Alice Enders, head of research at Enders Analysis. Sky’s success at the Premier League soccer rights auction this month made it more desirable, she said. “Sky is a very attractive business.”
Sky declined to comment while representatives for Fox and Disney didn’t immediately respond to requests for comment.
Prepared
Comcast chairman and CEO Brian Roberts said he’s prepared for the Murdochs to spurn Comcast’s advance. The proposal is structured so that Comcast will be successful as long as it brings more than 50% of Sky shareholders to its side.
“We’d prefer 100% but it’s not a condition,” Roberts said on a conference call. Comcast would settle with owning Sky alongside Fox or Disney as minority shareholders, he said. “We respect that maybe they don’t want to sell, but that will be something discussed further down the line.”
Driven by its interest in controlling Sky, Comcast had offered $60bn for much of Fox in December before Fox chose Disney’s lower offer, a person familiar with the matter said at the time. Comcast was considering making another bid for Fox assets this month, according to a person familiar.
Fox preferred to sell assets to Disney in part because it believed that deal would present fewer regulatory hurdles, people familiar with the matter have said. Comcast is the biggest US cable-TV operator and also owns one of the largest film and television groups, NBCUniversal.
It’s Sky’s technology that first lured Comcast. On a trip to the UK in November with Dave Watson, head of Comcast Cable, Roberts suggested jumping in a taxi and going to a mall to get an in-store demo of Sky’s products. They spent at least an hour at a Sky store going through every feature and comparing it to Comcast’s own X1 platform, which lets subscribers search for movies and TV shows through a Netflix-like user interface and a voice-activated remote control, Roberts said on the call.
“We were really terribly impressed,” Roberts said. “Seeing it again and listening to the passion of the sales, and looking at the product, and seeing the success in their earnings — all those things combined to reinforce what a number of us have known for years, this is a jewel.” — Reported by Joe Mayes and Thomas Seal, (c) 2018 Bloomberg LP
