Comcast Raises Sky Offer After Fox Sweetened Its Bid -- 3rd Update
12 July 2018 - 9:00AM
Dow Jones News
By Keach Hagey in Sun Valley, Idaho, and Chip Cummins and Ben Dummett in London
The battle for control of European pay-TV giant Sky PLC heated
up Wednesday, with 21st Century Fox raising its bid and cable giant
Comcast Corp. quickly countering later in the day, the latest
jockeying in a cross-Atlantic media deal showdown.
Comcast raised its offer for Sky to GBP14.75 per share, valuing
the company at $34 billion. That is a 5% premium to an offer Fox
announced earlier Wednesday and 18% above Comcast's earlier bid.
Comcast said its latest offer was recommended by Sky's independent
directors.
The fight for Sky could impact the broader fight between Comcast
and Walt Disney Co. to acquire most of Fox's entertainment assets.
Depending on how the auction for Sky plays out, Comcast could
decide to focus its efforts on the European operator and drop its
pursuit of Fox's assets, a person familiar with the matter
said.
Fox already owns 39% of Sky and is vying to consolidate
ownership. Earlier Wednesday, Fox lifted its bid to purchase the
rest of the company by more than 30% to GBP14-a-share, valuing Sky
at $32.5 billion.
Fox separately has put up for sale entertainment properties
including its Hollywood movie and TV studio, regional sports
networks and a stake in streaming service Hulu. That deal also
would include its Sky holding and other international assets.
Disney is currently in the lead for the Fox assets after
reaching an agreement to pay $71 billion in cash and stock, topping
a $65 billion all-cash offer from Comcast.
The role of the U.K. Takeover Panel, a regulatory body that
polices corporate deal-making, is creating an unusual dynamic in
the bidding war. As Disney and Comcast bid higher for the package
of Fox assets, the implied value of Sky also rises, forcing both
sides to raise their bids for Sky.
"You are basically bidding against yourself," said the person
familiar with the matter.
The panel could force Fox to raise its bid further, based on a
calculation of Sky shares derived from the Disney offer. The panel
has said it would make a ruling on the matter, but didn't say
when.
If Comcast winds up only acquiring Sky, the company believes it
would make strategic sense. "It's basically a mini-Comcast-NBCU,"
the person familiar with the matter said, referring to Comcast's
purchase of NBCUniversal, which created a mix of distribution and
content assets like those that Sky owns.
Before Comcast's latest move, Fox had said Sky's independent
directors agreed to its new offer. Fox launched its bid for all of
Sky more than 18 months ago. Since then, the deal has been
embroiled in a U.K. government review, which was expected to draw
to a close later this week.
Sky is one of the crown jewels of Rupert Murdoch's media empire.
It could help both Disney and Comcast compete with tech giants like
Netflix Inc. Sky produces its own content, while its satellite and
broadband offerings reach millions of European households. Both
Disney and Comcast view Sky as a route to expand their media and
distribution channels overseas.
Under the terms of Fox's latest bid, the company would have the
option to lower the threshold of shareholder support required to
approve the deal to just over half. At the moment, it requires
support from 75% of Sky's non-Fox shareholders.
The deal, though, continues to keep the door open for a more
streamlined approach -- should the two sides decide to change the
structure under U.K. law. Such a change would allow a simple
majority of all shareholders to wave the deal through.
A number of hedge funds, including American activist investor
Elliott Management Corp., have bought into Sky, and would likely
oppose any bid they felt undervalued Sky.
The government had been weighing for months whether Fox's
consolidation of Sky -- which operates a popular news channel in
the U.K. -- would constitute an overconcentration of ownership
among British news media. Mr. Murdoch and his family are major
shareholders in 21st Century Fox as well as News Corp, which owns
several large U.K. newspapers. News Corp also owns The Wall Street
Journal.
The U.K. culture minister has indicated a separate deal by Fox
to sell Sky News to Disney would be sufficient in preventing any
overconcentration of ownership.
Fox said it had obtained previous consent from Disney for the
higher offer. Fox will take on larger debt to fund the deal. That
liability will ultimately fall to Disney, assuming it completes its
deal for Fox.
Mr. Murdoch also hedged his bets to some extent. Fox said that
in the event the Disney and Fox deal falls apart because of
regulatory issues, Disney will pay Fox GBP1 for every share of Sky
that Fox buys as part of Wednesday's higher offer. That caps Fox's
real exposure to GBP13 a share, should it not end up being acquired
by Disney.
Write to Keach Hagey at keach.hagey@wsj.com, Chip Cummins at
chip.cummins@wsj.com and Ben Dummett at ben.dummett@wsj.com
(END) Dow Jones Newswires
July 11, 2018 18:45 ET (22:45 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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