Comcast offers to buy UK’s Sky TV

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U S cable giant Comcast offered to buy Sky for $31 billion in an unsolicited approach, taking on Rupert Murdoch’s Fox and Bob Iger’s Walt Disney in the battle for Europe’s biggest pay-TV group.
The world’s biggest entertainment company, which owns NBC and Universal Pictures, said on Tuesday it proposed to offer 12.50 pounds per share, significantly higher than the 10.75 pounds Fox had agreed to pay for the British company.
The offer pits Comcast’s Brian L Roberts against Murdoch, the 86-year-old tycoon who helped to launch Sky and pioneer pay-TV in Britain. Iger is also a long time rival after Comcast tried and failed to buy Disney for $54 billion in 2004.
Disney had agreed to buy Sky from Fox at a later date along with other assets in a separate deal worth $52 billion.
Media owners have been forced to embark on a wave of dealmaking and hunt for growth after the success of online groups Netflix Inc and Amazon.com Inc. prompted customers to start ditching their subscriptions.
Comcast bid $60 billion last year to clinch a deal with Murdoch’s Fox before losing out to Disney.
Shares in Sky soared 21 per cent to 13.34 pounds, indicating that investors expect a bidding war for a company that provides sports programming, films and broadband to 23 million homes across Britain, Ireland, Germany, Italy and Austria.
“Sky and Comcast are a perfect fit: we are both leaders in creating and distributing content,” Comcast Chief Executive Roberts, 58, said. “We think Sky is an outstanding company.”
Sky urged its investors to take no action since the approach did not represent a firm offer.
Murdoch’s Fox agreed to buy the 61 percent of Sky it did not already own in December 2016 but the takeover has been repeatedly held up by regulators over concerns the media tycoon wields too much influence in Britain.
The shares had been trading above the asking price since Sky this month agreed to pay less than expected for Premier League soccer rights, boosting its future earnings and prompting investors to demand a higher offer.
The prospect of a fight for a higher price also attracted the attention of U S hedge fund and activist investor Elliott, which has built up a 2.5 percent stake in Sky in recent weeks.
Hedge fund manager Crispin Odey, a former son-in-law of Murdoch who holds 1 percent of Sky, said he expected a counter offer and speculated whether Disney could make a direct bid for Sky to avoid Fox’s regulatory problems.
“Once you’re in a bidding war, it’s not about fair value, it’s about what do you think it’s worth,” Odey added.
Formed in 1990, Sky has built its business by offering leading content and technology.
It snapped up Murdoch’s pay-TV groups across Europe in 2014 to offer a distribution platform across the continent that is now proving attractive to the big U S content owners.
Comcast said it had not yet engaged with Sky over the proposal.
Its finance director, Michael Cavanagh, declined to comment on whether it could lead to a renewed bid for Fox.
Sky’s chairman is Murdoch’s son James, who is the chief executive of 21st Century Fox, so Comcast will have to gain the support of the independent directors for its better offer if it does not make a hostile bid.
Comcast’s Brian Roberts, the son of Ralph who founded the company in 1963, called Sky’s Deputy Chairman Martin Gilbert just before 0700 GMT on Tuesday to notify him of the offer, and called Sky Chief Executive Jeremy Darroch shortly afterwards, minutes after its statement had been published.
Sky’s independent directors are expected to meet in the coming days to discuss the offer.
The company said its independent directors were mindful of their duties to investors.
Comcast went public with the proposal to trigger the regulatory timetable on the deal because timing will be a key factor when investors choose which offer to take.
“We would like to own the whole of Sky and we will be looking to acquire over 50 percent of the Sky shares,” Roberts said, indicating he could be willing to share ownership of Sky as long as it has control.
“Innovation is at the heart of what we do: by combining the two companies we create significant opportunities for growth.”
Disney’s Iger, in Paris on a business trip, declined to comment.
Murdoch had been edging towards a deal for Sky in recent weeks, eight years after he first tried to buy the company.
Britain’s competition regulator said in January that Murdoch’s planned takeover should be blocked unless a way was found to prevent him from influencing the network’s news operation, Sky News.
The Australian-born Murdoch has been a power-broker in Britain since he bought the News of the World in 1969.
Critics, including many politicians, argue that he wields too much influence through his other titles, the Sun and Times newspapers, and in 2011 he had to close the News of the World after its journalists admitted hacking phones to get scoops.
Seeking to prove it would not influence Sky’s award-winning news channel in the future, Fox last week made further concessions, with a promise to maintain and fund a fully independent Sky-branded news service for 10 years.
Prime Minister Theresa May’s ministers have appeared wary of approving Murdoch’s bid for Sky, repeatedly asking the independent regulator to intervene, and a Comcast offer would face a smoother ride politically.
A spokesman for May said on Tuesday the deal was a commercial matter and declined to comment any further.
Comcast sought to talk up its own strengths when it made its statement, saying it had only a minimal presence in the British market and did not see any regulatory concerns.
Comcast said it recognised that Sky News was an ‘invaluable part of the UK news landscape’ and it intended to maintain its existing brand and culture.
“Our strong market positions are complementary with Sky’s leadership in Europe enhancing our preeminent position in the U S,” Comcast’s Roberts said.
Bankers from Robey Warshaw, Evercore and Bank of America Merrill Lynch are advising Comcast.
Robey Warshaw, a small boutique firm, has worked on some of Britain’s biggest deals.

 

 

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