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Rupert Murdoch's Fox ups Sky bid to Sh3 trillion, all eyes on Comcast

By Reuters | Published Wed, July 11th 2018 at 12:06, Updated July 11th 2018 at 12:12 GMT +3

Rupert Murdoch’s 21st Century Fox has raised its offer for Britain’s Sky in an agreed deal valuing the pay-TV group at $32.5 billion, seeing off rival bidder Comcast for now.

Fox, which has been trying to buy the pan-European group since December 2016, has offered to pay 14 pounds per share, a 12 percent premium to Comcast’s offer, but below the 14.80 pounds Sky shares were trading at on Wednesday.

Analysts said the bid threw down the gauntlet for Comcast, the world’s biggest entertainment company, to return with a higher offer. The U.S. cable group gatecrashed Fox’s bid for Sky in February, forcing the independent directors to drop their original recommendation for Fox’s offer.

Murdoch already owns 39 percent of the group.

“It’s good for shareholders and will probably be followed by another Comcast offer,” consultant Claire Enders said.

The fight for Britain’s leading pay-TV group is part of a bigger battle being waged in the global entertainment industry as the world’s biggest media giants offer tens of billions of dollars in deals to be able to compete with Netflix and Amazon.

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Comcast and Walt Disney are locked in a separate $70 billion-plus battle to buy most of Fox’s assets, which would include Sky.

Present in 23 million homes across Europe, Sky has become a prized asset due to the programs it creates and the direct relationship it has with customers.

“This transformative transaction will position Sky so that it can continue to compete within an environment that now includes some of the largest companies in the world,” Fox said.

PRIME TIME DRAMA

Fox’s new offer represents an 82 percent premium to where Sky’s shares were trading in December 2016 before Fox agreed its original deal, and a multiple of 21 times 2017 earnings per share.

However British regulators have indicated that if Disney succeeds in buying Fox, including the 39 percent stake in Sky, it would be required to offer the same price for the remainder of Sky. According to some shareholders, that has set an implied higher floor for Sky’s shares.

Hedge funds including Elliott have bought into Sky in recent months and other vocal shareholders such as Crispin Odey have demanded that the independent directors secure a better deal.

“There are enough sub-plots in the race to acquire Sky to commission a prime-time drama,” said George Salmon, equity analyst at Hargreaves Lansdown.

“Fox coming back in for Sky isn’t a surprise in itself, but the fact the offer is slightly behind what some had anticipated brings another twist. In fact, there’s every chance it might entice another counter from Comcast.”

Murdoch’s Fox said the performance of Sky since December 2016, including the renewal of the right to show English Premier League matches at a lower price than expected, justified its higher offer.

The British government is expected to allow Fox to buy Sky this week, after the U.S. group agreed to sell Sky’s award-winning news channel to Disney to prevent Murdoch from owning too much of the British media.

Fox, run by Rupert’s son James who is also the chairman of Sky, has made a string of guarantees to help secure backing for its deal, including investment in British TV production, technology and the protection for Sky News.


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