Comcast launches rival £22bn Sky takeover bid
Comcast has gatecrashed Rupert Murdoch’s takeover of Sky with a rival £22bn offer, sparking a bidding war for Britain’s biggest pay-TV broadcaster.
The media and telecoms company, which owns NBC Universal and is the largest cable operator in the US, has made an all-cash offer of £12.50 a share, a 16% premium on the offer from Murdoch’s 21st Century Fox, which values Sky at about £19bn.
Fox owns 39% of Sky and submitted its bid to take full control in December 2016 but the deal has been delayed by regulatory issues.
Comcast has made its move on Sky after having an offer for 21st Century Fox’s entertainment assets, which include Sky and the Deadpool and X-Men Hollywood studio 20th Century Fox, spurned by Murdoch last year.
Murdoch agreed a $66bn (£47bn) sale to rival Disney that is being scrutinised by US regulators, as Fox’s own deal for Sky continues to be investigated by the UK competition regulator over issues including media plurality concerns.
The UK takeover panel ruled this month that after Disney completes its Fox deal it must make a full takeover bid for Sky, even if the competition regulator quashes Murdoch’s attempt to buy the 61% he does not already own.
Comcast, which has 1,300 employees in the UK in subsidiaries including the production company behind Downton Abbey, made a number of pledges such as keeping Sky’s HQ in Osterley, south-west London, and guaranteeing the editorial independence and funding of Sky News for at least 10 years.
“We are determined to be responsible and trusted owners of Sky,” Brian Roberts, the chair and chief executive of Comcast, said. “We understand and appreciate the value of news and are committed to protecting the important role that Sky News plays in providing a high-quality impartial news service. Any news organisation needs to have independence and be protected to do its job. You want there to be independence.”
The company also said it would not look to acquire a majority interest in any UK newspaper for at least five years, a shot at the Sun and the Times owner Murdoch, whose takeover bid is being scrutinised over concerns that taking over Sky News would give him too much control of UK news media.
This month Disney “expressed an interest” in buying Sky News – regardless of whether its takeover of Fox and Sky is successful – in an attempt to help solve the plurality issue that is slowing up Murdoch’s bid and see off Comcast.
Comcast said it would prefer to take full control of Sky but it would be “happy at 50.1% and 100% and anywhere in between”. However, Roberts said he did not expect Fox or Disney to want to remain a minority shareholder.
“My own opinion is there is unlikely to be a large minority shareholder,” he said. “The most likely scenario when it is done, more likely than not, is that we would end up with most, if not all, the shares. But we are comfortable either way.”
Comcast would need approval from 82% of Sky’s non-Fox shareholders to achieve a 50% controlling stake.
While 21st Century Fox said it remained committed to its offer for Sky and was “considering its options”, meaning potentially raising its bid, analysts believe Murdoch has to clear any offer increase with Disney.
“Murdoch is out of this now, there is another kingmaker in Disney; he will pick up the phone and solicit a higher bid as Fox is now worth a lot more in total,” Alex DeGroote, a media analyst at Cenkos Securities, said.
Under the terms of their agreement Fox has “broad parameters” to increase debt or buy or sell assets without breaking its deal with Disney. But in “certain instances” Fox cannot act without Disney’s approval. In addition, Disney cannot make its own direct bid for Sky without the written consent of Fox.
Sky’s independent board, which had told shareholders to accept Murdoch’s offer, has withdrawn that recommendation in light of Comcast’s higher bid.
“The independent committee is mindful of its fiduciary duties and has consistently sought to maximise value for all shareholders,” Sky said.
Comcast said its offer was warmly received by Sky.
Disney, which has called Sky a “crown jewel”, is keen on the broadcaster’s streaming and on-demand service, Sky Now, as it seeks to compete with Netflix.
“In reality, this is likely to be about what Disney is willing to pay for Sky as Disney will be the buyer of the Fox assets,” Ian Whittaker, an analyst at Liberum, said.
“We think that Fox/Disney will counterbid. Ownership of Sky would seem central if Disney wanted to expand its plans to build a direct to consumer network in North America into Europe as it would give Disney the number one pay-TV operator in the UK, Germany and Italy.”
With Sky’s share price trading at about £13.50, up more than 3% on Wednesday, DeGroote criticised Comcast’s offer and said he expected a bidding war to ensue.
“It’s derisory, far too low, bids for Sky must start at a minimum of £15-plus, putting its value at over £27bn,” he says. “Sky’s independent directors can’t accept Comcast’s offer, I don’t know any Sky shareholders that would now entertain a £12.50 offer, it is not plausible.”
DeGroote believes Comcast’s formal offer could spark further bidders to emerge. “This will bring into play a number of parties that have not yet shown their hand, such as potentially Netflix and AT&T, depending on the outcome of its Time Warner deal,” he said.
“An investment memorandum will be distributed involving everyone: Amazon, Google, Apple – they will all be encouraged to take a look.”
Comcast said taking over Sky would result in savings of $500m annually “with only limited impact on headcount expected”.