Comcast Sky Takeover – Volatility Ahead

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Comcast Sky Takeover – Volatility Ahead?

Shareholders in media broadcasting company Sky will be rubbing their hands with glee as the price of Sky shares has doubled in the past year. The American cable operator Comcast won the auction sale for Sky on 22 September, with shareholders achieving a valuation of £17.83 per share.

Sky Takeover Numbers

The Comcast purchase of Sky places a value of over £30bn on the company, in this blind auction process which was overseen by the UK’s Takeover Panel. The Comcast Chairman and Chief Executive commented that it was “a great day for Comcast“.

Sky recommended shareholders accept the bid as it “represents materially superior value“.

In the UK, Sky has 23mn subscribers and its rights to show Premier League football mean that it’s one of the most profitable TV companies in Europe.

Fox Bid

Comcast’s rival in the auction was 21st Century Fox, which bid £15.67 per share. Fox already owns 39% of Sky and it seemed on the cards they would succeed in their bid.

A number of regulatory concerns and issues have been raised as a result of the sale of Sky and the influence Fox owner, Rupert Murdoch, already has on the UK’s media.

However, Brian Roberts, the Chairman and Chief Executive of Comcast, stated:

Sky is a wonderful company with a great platform, tremendous brand, and accomplished management team. This acquisition will allow us to quickly, efficiently and meaningfully increase our customer base and expand internationally. We now encourage Sky shareholders to accept our offer, which we look forward to completing before the end of October 2020.”

Comcast Global Reach

Comcast already owns NBC Universal and is the largest provider of cable in the United States. Following the takeover of Sky, the company will be the largest provider of pay TV in the world, with approximately 52mn customers globally.

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Chief Executive of Sky, Jeremy Darroch, commented:

This is the beginning of the next exciting chapter for Sky. Brian and his team have built a great business and we are looking forward to bringing our two companies together for the benefit of our customers and colleagues. As part of a broader Comcast we believe we will be able to continue to grow and strengthen our position as Europe’s leading direct to consumer media company“.

Choppy Water Ahead?

While the deal seems done and dusted at this stage, with so many twists and turns already, it is unlikely that the next 12 months will be straight forward for Sky. Any potential regulatory investigation, or shareholder revolt, could see sudden volatility impact the current valuation. There may still be further trading opportunities yet.

Comcast and Fox take $34 billion battle for Britain’s Sky to the wire

LONDON (Reuters) – Comcast ( CMCSA.O ) and Twenty-First Century Fox ( FOXA.O ) face a quick-fire auction for British broadcaster Sky SKYB.L on Saturday after neither side backed down in a drawn-out $34 billion battle.

A deadline for U.S. cable giant Comcast and Rupert Murdoch’s Fox to declare that their all-cash offers for Sky would not be increased passed on Friday without a move by either side, triggering a rare auction run by Britain’s Takeover Panel.

Fox, which has the backing of partner Walt Disney ( DIS.N ), and Comcast are vying for control of Sky to bolster their businesses in the face of rapid growth of streaming services such as Netflix ( NFLX.O ), which are transforming the media industry.

Saturday’s auction of pay-TV group Sky will last a maximum of three rounds and any bids will be made in private by either telephone or email, a source with knowledge of the process said.

The Takeover Panel then expects to announce the offer prices that the bidders have submitted on Saturday evening.

Sky’s independent directors, who are so far recommending that investors back Comcast’s 14.75 pounds a share offer, which values the broadcaster at 25.9 billion pounds ($34 billion), are expected to meet immediately to decide which offer to back.

Comcast and Fox could end up making the same bids.

Shares in the London-listed pay-TV business closed up 0.3 percent at 15.85 pounds on Friday ahead of what is the climax to two lengthy and interlocking takeover fights for both Fox and Sky that are set to reshape the entertainment sector.

“This will most likely mark the end of a process that we have managed for almost two years,” Sky Chief Executive Jeremy Darroch wrote in a memo to staff on Thursday.

(GRAPHIC: Battle for Sky Plc – reut.rs/2zmdFup)

Fox, which already holds a 39 percent stake in Sky, first offered 10.75 pounds a share for the rest of the broadcaster in December 2020 but saw its takeover delayed by a prolonged regulatory review of the proposed deal in the UK.

The acquisition was then complicated by a separate deal that Disney struck in December 2020 to acquire a host of film and TV assets from Fox, including its Sky stake.

Comcast then gatecrashed both deals, forcing Disney to hike its offer for the Fox assets to about $71 billion in June and Fox to sweeten its bid for Sky to 14 pounds a share in July.

While Comcast responded by immediately boosting its Sky offer to 14.75 pounds a share from 12.50 pounds, it abandoned its attempt to acquire the Fox assets on July 19.

Britain’s Takeover Panel announced the auction on Thursday to end the Sky stand-off and force both Comcast and Fox to disclose their best offers.

Shareholders in the British broadcasting group will have about a fortnight to decide which one to back after the auction finishes.

Fox’s 39 percent shareholding in Sky could become an important factor in determining which suitor ultimately wins control following the auction if the rivals make similar bids.

Fox has set its acceptance threshold for a deal at 75 percent of Sky’s minority shareholders but has the option to lower it and seek a simple majority of all Sky shares, which is Comcast’s target.

Then Fox’s Sky stake would put it in a better position than Comcast to cross the 50 percent threshold.

A Fox victory would result in Disney then taking control of Sky, once it has completed its deal for the Fox assets.

Reporting by Ben Martin; Editing by Alexander Smith

Sky takeover: What is Comcast, why has it launched its bid and is a deal likely to go ahead?

What does Comcast already own, what would a takeover mean for Sky, and is it even likely to get approval?

  • Josie Cox Business Editor @JosieCox_London
  • Tuesday 27 February 2020 11:00 <<^moreThanTen>>
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US cable giant Comcast on Tuesday morning announced that it was making a £22bn bid to take over Sky, hoping to gazump a rival approach from Rupert Murdoch’s 21st Century Fox.

But what exactly is Comcast? What does it already own? Why would it want to buy Sky and is a deal even likely to go through? We take a closer look.

What is Comcast?

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Comcast Corporation is a massive global media and technology company with a total market capitalisation equivalent to around £132bn. It has two primary businesses: Comcast Cable and NBCUniversal. Comcast Cable is one of the US’s biggest video, high-speed internet, and phone providers through its Xfinity brand. NBCUniversal, meanwhile, operates a slew of news, entertainment and sports cable networks. Among many other assets, it owns Universal Pictures, DreamWorks Animation and channels like MSNBC, CNBC and The Weather Channel. It also owns the Universal Parks and Resorts.

NBCUniversal already has a head office in London and employs around 1,300 employees in the UK. Over the past three years it has invested over $1bn (around £700m) in film and TV productions here – but its UK presence is still significantly smaller than Fox’s.

Why does it want to buy Sky?

In short, Comcast is keen to expand its international footprint and diversify away from the US, especially – as some analysts say – because pressure on the cable industry there appears to be increasing. Think of streaming services like Netflix and Amazon.

Currently, around 9 per cent of Comcast’s revenue is generated internationally but by buying Sky, it would be able to increase that proportion to 25 per cent. Sky currently has around 23 million customers globally and dominates in Italy, Germany, as well as here in the UK, which would mean that Comcast could swiftly grasp swathes of the market in which it has yet to make a splash.

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In Tuesday’s statement, Comcast said that “in an increasingly global competitive landscape, the combination of Sky with Comcast would create an organisation ideally equipped to grow, compete and innovate for the benefit of over 50 million combined global customers”.

It said that the transaction would “create opportunities for Sky and Comcast to work together for best-in-class platform innovation” and that adding Sky to its stable of brands would “enhance the entertainment, content creation, distribution and technology leadership of Comcast, and importantly expand Comcast’s international footprint to more effectively compete in the rapidly changing and intensely competitive entertainment and communications landscape”.

Finally, it said that Comcast and Sky would be able to benefit from each other’s technology development.

It said that it expects a combination with Sky to help Comcast’s free cash flow per share increase from the very first year onwards – excluding one-time transaction related expenses.

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“The board of Comcast believes that this transaction would provide attractive returns to shareholders and the combined business would be well positioned to drive future growth,” it said.

What would a takeover mean for Sky?

Back in December 2020, 21st Century Fox already agreed to buy the 61 per cent of Sky that it does not already own, so shareholders have had some time to get used to the idea of Sky getting a new owner.

The prospect of a Fox takeover, however, has raised several regulatory concerns.

Last month the Competition and Markets Authority said that it had provisionally found that a Fox takeover would not be in the public interest and that a combined entity would have “too much influence over public opinion and the political agenda” because of all the other European assets Fox already owns.

Some Sky shareholders have been concerned that a Fox takeover might influence the orientation and identity of Sky, but those concerns might not be as pressing when it comes to Comcast because its presence in Europe so far has been much more limited.

In fact, Comcast has already said that it does not believe that a tie-up would create any media plurality concerns in the UK. It also indicated that if the deal goes through it would, operationally, keep many things the same at Sky.

It said that it would maintain Sky’s UK headquarters at the Osterley campus in west London and that it would continue to support Sky’s technology hub in Leeds and its software engineering academy scheme, which offers technology apprenticeships and graduate opportunities to young people across the north of England. It also said that it would continue “investment in employees’ professional development across the UK” and that it was committed to Sky’s local community programmes to inspire more people to get involved in sports.

So is a deal likely to go ahead?

At this point, anything could still happen. Shares in Sky surged by more than 20 per cent on Tuesday morning, taking the market capitalisation of the company to around £23bn. That jump indicates that some investors might be anticipating a bidding war. It will be particularly interesting to see how Rupert Murdoch responds – don’t forget he already owns around 39 per cent of Sky.

What’s certain though, is that a Comcast bid will be subject to exactly the same regulatory scrutiny as a Fox bid.

Anti-trust clearance will be required from both the European Commission and individual national authorities.

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