U.S. cable operator Comcast, which owns NBC Universal, made a £22.1B ($30.8B) offer for Sky, "threatening Rupert Murdoch's takeover" of the U.K. broadcaster and "complicating the media tycoon's plans to sell his entertainment empire to Walt Disney," according to Massoudi, Garrahan & Samson of the FINANCIAL TIMES. Comcast unveiled the "possible all-cash offer on Tuesday," valuing Sky at £12.50 ($17.40) per share, a 16% premium compared to the £10.75 ($14.97) offer from Murdoch's 21st Century Fox. Comcast is already the U.S.'s "most dominant provider of cable and broadband" with 29 million customers. A deal would give it a "powerful footprint" in the U.K., Germany and Italy, where satellite-focused Sky has 23 million subscribers. The move "immediately throws the spanner in the works" for Murdoch, who has since late '16 been trying to acquire the 61% of Sky that Fox does not already own (FT, 2/27). In London, Christopher Williams reported Comcast CEO Brian Roberts, who is part of the company's "founding dynasty" and controls 33% of its voting rights, said that he "made his move after being impressed by Sky’s technology on a visit to Britain in November." Comcast "was also swayed by the outcome" of the recent Premier League rights auction, which "eased Sky’s cost burden and sparked calls from non-Murdoch shareholders for a more generous bid." Roberts: "The U.K. is and will remain a great place to do business. We already have a strong presence in London and Comcast intends to use Sky as a platform for our growth in Europe. We intend to maintain and enhance Sky’s business" (TELEGRAPH, 2/27). The BBC reported analysts from Liberum said that there is "a strong rationale" for Comcast to buy Sky as it would give it "immediate leading positions" in pay-TV markets in the U.K., Germany and Italy, as well as a presence in Spain. Liberum said that the deal would give Comcast a "very powerful distribution pan-European network" (BBC, 2/27).
SKY SHARES ON THE RISE: BLOOMBERG's Mayes & Seal reported Sky shares rose to as high as 1,355 pence in London, the most since Fox’s offer in Dec. '16. Disney shares declined as much as 3.2% on open in N.Y., while Comcast fell as much as 6.2% and Fox was down 2.2%. Sky noted the approach by Comcast, which does not yet "amount to a formal offer," and will make further announcements "when appropriate," it said in a statement (BLOOMBERG, 2/27).
'JUST THE START': CCS Insight VP/Multiply & Media Paolo Pescatore said the effort by Comcast to acquire Sky TV is “just the start of a huge ball of many of these companies coming and looking for strategic assets in Europe for growth.” Pescatore said U.S. companies are “coming in a big way” to Europe because “there isn’t much scope for growth in the U.S. and there’s plenty of scope for growth in Europe given that the penetration of pay-TV services is a lot lower compared to the U.S.” CNBC’s Steve Sedgwick said Murdoch “must feel a great affinity” for Sky TV because “he built it, this is his baby.” Sedgwick: “The coverage of sports in the United Kingdom was pretty woeful compared to what it is now before Sky” (“Street Signs,” CNBC, 2/27). FT's Arash Massoudi said the Comcast offer for Sky is a “lot cleaner, it’s a smoother proposal. It’s all cash. They don’t have much overseas” and what Comcast has “in its favor is lack of history in the U.K.,” as opposed to Murdoch “who’s been all over this country for 30, 40 years, and that legacy is haunting him a little bit” in this sale (“Worldwide Exchange,” CNBC, 2/27). CNBC’s Geoff Cutmore said in the U.K., “nobody actually has heard of Comcast,” which makes this is “such a delicious bid and a very opportunistic bid but one ultimately the regulators” in the U.K. will “look favorably upon” (“Squawk Box,” CNBC, 2/27).
THE PRICE IS RIGHT: Gabelli & Company Research Analyst Brett Harriss said the price for Sky is “certainly a reasonable acquisition price especially considering their largest cost, the English Premier League is likely going to step down in the coming years based off of the most recent contract. So overall, from a strategic perspective and a valuation perspective, we think it could be a good deal for Comcast.” CNBC’s Geoff Cutmore said Roberts stated “part of the reason they’re interested is the Premier League rights that Sky has” (“Squawk Box,” CNBC, 2/27). Gabelli Funds Associate Portfolio Manager Lawrence Haverty: “The sports rights that Sky controls throughout Europe are very, very powerful … so this is very desirable asset” (“Squawk on the Street,” CNBC, 2/27).
