Analysts are split as to whether Comcast’s $31B offer to buy Sky will kick-start a bidding war for the European pay-TV operator. However, the audacious bid puts “tanks on Fox’s lawn” according to key banker and has seen Sky shares hit their highest levels in nearly 20 years.
The timing of the move is interesting as it comes days after Sky won a number of the best rights packages for the English Premier League at a 14% discount on its previous deal, which could see it save around £200M (US$279M) per year.
The offer has pushed Sky shares up 22% to £13.50 (US$19), which is their highest since 2000 and above Comcast’s bid this morning.
Laith Khalaf, Senior Analyst at investment firm Hargreaves Lansdown, said that Comcast has “gazumped” 21st Century Fox. “Sky shares are now trading 2% above the Comcast offer price, so the market clearly smells the scent of some more action before this saga draws to a close.”
“The successful conclusion of the Premiership football rights auction has moved the dial for Sky, which secured more games at a lower cost than last time around. There may well be some reaction from 21st Century Fox… however, since the bid for Sky was launched, 21st Century Fox has agreed to sell many of its assets, including Sky, to Disney. It remains to be seen therefore what appetite Rupert Murdoch has to pursue Sky any further.”
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Crispin Odey, Founder of hedge fund firm Odey Asset Management, which owns a small stake in Sky, and Rupert Murdoch’s former son-in-law, said that Fox would be furious with the offer from Comcast. “This is tanks on their lawn,” he told Bloomberg.
Paul Richards, Media Analyst at institutional stockbrokers and corporate advisors Numis, said the Comcast offer was a “very good outcome” for Sky shareholders and said there was a feeling that there would be a “sweetening of the deal” from Fox, while Richard Hunter, Head of Markets at Interactive Investor, added that Murdoch’s 39% stake in Sky would complicate matters. “It is equally plausible that Fox will need to return with an improved bid, which the market was beginning to anticipate in any event.”
Not all analysts believe that Fox, particularly following its sale to Disney, will return with an improved offer. Ian Whittaker, Head of European Media at investment bank Liberum Capital, said: “We expect [the Comcast] deal to go through as we do not think Fox will want to get into a bidding war, especially given the complications surrounding Sky News.”
“Moreover, for many shareholders, the Comcast bid may be more attractive even if Fox does come back with a raised bid as it would come with much lower regulatory risk and the comments about investing in the U.K. content space, upholding news impartiality and a commitment to the U.K. in general are likely to help the bid gain favor with the U.K. government who may be looking for an optimal way to defuse the political risks from the Fox bid,” he added.
There has been no word from UK regulators or the British government, led in this matter by Secretary of State for Digital, Culture, Media and Sport Matt Hancock. However, his rival, Shadow Culture Secretary Tom Watson said that Comcast’s bid must be “carefully scrutinized”.
“The UK’s media plurality and Sky’s high broadcasting standards are at stake in this bidding process. All bids including this new one from Comcast must be very carefully scrutinised. Comcast must demonstrate its commitment to plurality by guaranteeing a properly funded Sky News for at least a decade as a key condition of the sale,” he noted.
Next move, Murdoch.
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