Breakingviews - Comcast’s $31 bln Sky bid spoils Disney-Fox party

Comcast Center in New York. Image courtesy of the company.

LONDON (Reuters Breakingviews) - Comcast boss Brian Roberts is driving a Sky-shaped wedge between Walt Disney and Twenty-First Century Fox. The U.S. cable group’s 22 billion pound ($31 billion) offer for the UK pay-TV group leaves Fox chair Rupert Murdoch with two unappealing options: enter a bidding war for Sky, or re-think his deal to sell Fox’s entertainment assets to Disney chief Bob Iger.

Sky investors owe a big thank you to a store employee near the group’s London head office. Roberts’ interest in the broadcaster firmed up after an hour-long demonstration of its flagship Sky Q TV product during a trip at the end of last year. Comcast is offering 12.50 pounds a share in cash for Sky, comfortably beating Fox’s bid of 10.75 pounds per share for the 61 percent of the company it does not own.

Comcast’s slim UK operations mean the bid should raise few competition concerns. Fox, by contrast, has been told by regulators that its bid risked giving the Murdoch clan too much influence over Britain’s news agenda. It’s now waiting publication of a final report that will spell out regulators’ recommended remedies, such as a separate editorial board for Sky News. Media secretary Matt Hancock will have the final say in the summer.

Comcast reckons its expertise funnelling TV shows, sports and movies directly to homes makes it a better owner of Sky. How the $183 billion group’s own shareholders will benefit is unclear: Comcast’s offer contains lots of detail about supporting creative industries and young people in the UK, but little about financial returns. That may be because Roberts’ real objective is to upset a $52 billion all-stock tie-up that Disney and Fox announced in December. Comcast still covets Fox’s assets, Reuters reported earlier this month. Iger has described Sky as Fox’s “crown jewel”.

Comcast’s offer will go ahead if just over 50 percent of Sky shareholders accept it. That means Murdoch’s 39 percent stake will not be enough to block the deal. The 86-year-old mogul therefore has two options: revise the terms of the Disney sale to exclude Sky, or enter into a bidding war with Roberts. Sky shares jumped by a fifth on Tuesday morning and now trade almost 7 percent above Comcast’s bid. Investors have placed their bets.


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