Comcast Offered $ 31 Bn for Sky Group

Comcast Offered $ 31 Bn for Sky Group

Comcast, a global telecommunication conglomerate and the biggest US cable operator, made a cash offer to buy Sky, Europe’s largest pay-TV service, for $ 31 Bn (£ 21.1 Bn), or £ 12.5 per share, topping 21st Century Fox’s bid of £ 10.75 to acquire the remaining 61% it does not own.

Comcast Corporation is the largest broadcasting and cable television company by revenue. It consists of two primary businesses: Comcast Cable, which operates in the Cable Communications segment (through the Xfinity brand); and NBCUniversal, which operates in Cable Networks (TV channels, including MSNBC, CNBC, USA Network, E!, The Weather Channel and others), Broadcast Television (NBC, Telemundo), Filmed Entertainment (the production studio Universal Pictures) and Theme Parks (Universal Parks & Resorts).

Sky plc., together with its subsidiaries engages in entertainment and communications businesses. The British company offers paid television broadcasting and home communications services, including broadband and telephony. Sky serves residential and commercial customers in the United Kingdom, Ireland, Italy, Germany and Austria, broadcasting live sporting events, drama and shows from the US, under the brands Sky TV, skyATLANTIC, skyTG24, skySPORTS, skyCINEMA, skyNEWS, skyARTS, skyLIVING, and sky1.

Comcast’s offer could end up spoiling Disney’s multi-billion deal to buy a significant stake in 21st Century Fox, which ultimately assumes Fox’s offer to buy the remaining 61% stake in Sky would be successful. The bid takes advantage of Fox’s difficulties in buying the share of Sky that it does not already own: British regulators expressed repeated concerns about giving Rupert Murdoch’s empire more control over the country’s media, where he owns several newspapers and have prolonged the approval process for over a year, forcing 21st Century Fox to offer more concessions.

It seems that whoever ends up acquiring Sky, it would get a business with well-established brands, a powerful presence (around 22.5 M subscribers) on the major European markets – Germany, Italy and Spain – and the leadership position in pay TV in the UK, along with the broadcast rights for the English Premier League, which is gaining popularity in the US.

By acquiring Sky, Comcast would gain a huge foothold in Europe at a time when US regulators have spoiled its attempt for domestic expansion. According to Comcast, Sky would increase its international revenue from 9% of total sales to 25%. With the acquisition, Comcast would gain access to an effective distribution mechanism and would allow for cross-promotion as Sky has its own productions and is a customer of Comcast’s content.

Analysts think that a purchase of Sky is more accretive to Fox and to presumed Fox media-asset buyer Disney but is more strategic for Comcast. According to Bloomberg, as helpful as the purchase would be to EPS and free cash flow (FCF), Sky doesn’t do much for Disney’s growth profile. For Comcast, Sky would mean EBITDA growth rather than EPS or FCF potential.

After the announcement, the shares of Sky surged more than 20% to £ 13.31, topping Comcast’s offer, indicating that investors might be expecting a bidding war. Shares of Comcast fell 7.4% to $ 36.66, its biggest decline since 2011. Disney dropped 4.5% to $ 104.87 and Fox jumped 3% to $ 37.63.


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