Fox ‘considering options’ as Comcast deals knockout blow for Sky

Sky’s stock has jumped in value after the pay TV operator’s independent board recommended shareholders accept its superior offer in the sealed bidding process carried out at the end of last week, with Fox “considering its options” over its 39% stake in the company.

“As the price of the final Comcast Offer is materially superior, it is in the best interests of all Sky shareholders to accept the Comcast offer. Accordingly, the Independent Committee unanimously recommends that Sky shareholders accept the Comcast Offer, and in order to ensure the successful closing of the Comcast Offer, urges shareholders to accept immediately,” said Sky, after Comcast placed a bid of £17.28 (€19.23) a share, representing a premium of 125% on the company’s price at the end of 2016, just before 21st Century Fox made its initial approach.

Fox placed a bid of £15.67 a share. Following Sky’s committee’s recommendation, the company said it was considering its options regarding its own 39% stake in the company and would make a further announcement in due course.

The company said it was “proud to have played such a significant role in building the incredible value reflected today in Comcast’s offer”.

The Comcast offer values Sky at a 9% premium to Sky’s closing share price on Friday with an enterprise value of £36.31 billion, It is likely to win approval of a majority of shareholders, even though Fox’s intentions around its 39% remain uncertain. There is also a possibility that some hedge funds may decide not to tender their shares.

The first round of the unusual sealed auction process supervised by the Takeover Panel only saw marginal increases on Comcast’s previous £14.75 a share price, according to reports, but the final round saw Comcast deliver a bid that Fox – and Disney, which has to authorise any bid – felt unable to match. The final Disney-Fox bid of £15.67 was seen by some as distinctly underpowered as it fell short of the market price of Sky’s shares on Friday.

Tech, media and telco analyst Paolo Pescatore said that the Comcast offer was “unsurprising given the value that Sky will bring to the company in the future.”

Pescatore said that Comcast-owned Sky will be a major force in European pay TV and that the deal could trigger other consolidation moves.

“There are significant growth opportunities in Europe. The combined entity will be a considerable force. Expect to see other American (including the losing party) and Asian providers to make similar moves for other European content and media assets,” he said

“Sky and its customers will now benefit from being part of the wider group; access to more services, products and features. And financial security to some extent to bid for key costly premium content rights; in particular sports which is arguably the company’s prized asset with the Premier League.”

Mo Hamza, senior analyst at Kagan, the TMT arm at S&P Global Market Intelligence said that the deal would likely be “transformational” for Comcast.

“The bold £17.28 bid highlights the potential for a strategic alignment between two pay TV giants with similar expansion ambitions and diversified asset investments in content ownership and distribution — Sky’s 119 TV networks in Europe and Comcast’s NBCUniversal Media LLC ownership — as well as technology including virtual reality, IP distribution, next-generation advertising and over-the-top video,” said Hamza.

“In recent years, major US media and communications sector investment into Europe has largely been led by Liberty Global or major media companies such as Discovery and Viacom. This deal is as much about next-generation distribution as it is about content.”

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