Comcast sets stage to fight Fox, Disney with $31 billion Sky bid

Bloomberg

Comcast jumped into the fray for Sky Plc, challenging Rupert Murdoch’s 21 Century Fox Inc. and Walt Disney Co. with a cash offer valuing the business at 22.1 billion pounds ($31 billion) and opening the possibility of a bidding contest for the UK’s biggest pay-TV 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 pounds per Sky share on Tuesday. That exceeds the 10.75 pounds offered by Fox for the 61 percent stake it doesn’t already own in the European broadcaster by about 16 percent.
Comcast sprung the offer on Sky, 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 $52.4 billion 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 percent 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 percent to 1,323.50 pence, 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 Chief Executive Officer Bob Iger called Sky a “crown jewel” among Fox assets in an 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.

Deal Structure
Comcast Chairman and Chief Executive Officer 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 percent of Sky shareholders to its side.
“We’d prefer 100 percent but it’s not a condition,” Roberts said. 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 $60 billion 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. “We were really terribly impressed,” Roberts said.