Published: Fri, March 02, 2018
Markets | By Terence Owen

Comcast challenges Murdoch with $31 billion offer to buy Sky

Comcast challenges Murdoch with $31 billion offer to buy Sky

Comcast is offering more per share compared with a bid from Rupert Murdoch's 21st Century Fox for the 61% of Sky it does not yet own, according to details of the surprise announcement.

"The notion that Comcast might make a topping bid for Fox has weighed heavily on Comcast shares, which have entirely missed the market rebound in the days since their continued interest was first reported".

The company made an all-cash offer of £12.50 per share, 16 percent higher than the offer made by 21st Century Fox (NASDAQ: FOXA). The deal would value Sky at £22.1 billion ($30.9 billion).

"Adding Sky to the Comcast family of businesses will increase our global revenues from 9% to 25% of company revenues".

The deal would take Comcast's subscriber base over the 50-million mark, adding Sky's 23 million customers in Europe to Comcast's 29 million in the U.S. Sky shares surged on the news and were up more than 20% by noon London time, their highest level since 2000.

"Sky has a proud record of investment in news and programming".

"A combination would bring attractive financial benefits to Comcast shareholders" and is expected to be accretive to Comcast's free cash flow per share in year one", the company said, adding that the deal would enhance its entertainment, distribution and technology capabilities and expand Comcast's global footprint to "more effectively compete in the rapidly changing and intensely competitive entertainment and communications landscape".

Comcast already has NBC Universal film and TV assets, however, the deal "would give it a very powerful distribution pan-European network".

Why it matters: This bid directly competes with 21st Century Fox's Rupert Murdoch's offer, which was provisionally blocked by the British Competition and Markets Authority (CMA) in January.

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Sky is known in Europe for its live football broadcasts as well as for premium content such as HBO's "Game of Thrones" and in-house productions such as "Fortitude" and "Britannia". If the Disney-21st Century Fox deal is eventually completed, Fox Broadcasting and the FS1/FS2 cable channels will not be included in the deal. Disney, too, has been keen on expanding internationally, with the British company serving as an important part of its $52 billion plan to buy a significant portion of Twenty-First Century Fox.

It also pledged to ensure the future of Sky News, a flashpoint in Fox's £11.7bn takeover bid because of regulatory concerns over Mr Murdoch's dominance in United Kingdom media ownership. In the meantime, Fox has agreed to sell assets to Disney in a follow-on deal, including Sky. Comcast still covets Fox's assets, Reuters reported earlier this month.

One of the competition watchdog's main objections to Murdoch's taking full control of Sky was the fact he would be able to exert pressure on Sky News' editorial line.

Comcast's chief executive says he is confident the firm will get the necessary regulatory approvals.

Comcast chairman and CEO Brian Roberts said he's prepared for the Murdochs to spurn Comcast's advance.

The Liberum analysts said there was a "very good chance" that Comcast's bid would succeed.

Comcast added that it did not believe its offer "should create any media plurality concerns in the UK".

Comcast said it had not yet engaged with Sky over the proposal and its finance director, Michael Cavanagh, declined to comment on whether it could lead to a renewed bid for Fox.

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