Wall Street Punishes All Three Media Giants In Sky Scrum — Especially Comcast

Wall Street investors didn’t appear to appreciate Comcast throwing a wrench into 21st Century Fox’s plan to acquire the remainder of UK pay-TV colossus Sky, punishing all three players in the day’s drama.

On a down day overall for the markets, Fox surrendered the least of the trio after Comcast announced plans to try to snatch Sky with a higher offer, sliding 3% to finish at $37.63. Disney, which announced plans in December to acquire most of Fox, including its planned ownership of Sky, slipped 4.5% to $104.50. Comcast took the biggest hit by far, shedding 7% to end the session at $36.66.

Reaction reverberated throughout the day given the tens of billions of dollars and prime media real estate at stake. One key variable, of course, remains whether Comcast could make good on its talk of trying to outbid Disney for the Fox assets. (Comcast chief Brian Roberts said today that he and Fox boss Rupert Murdoch haven’t talked since earlier M&A discussions ended two months ago.)

Hours after Comcast had its moment in the sun with a conference call and UK investors boosted Sky shares on expectations of a bidding war, Fox issued a terse — verging on diamond-cut — statement. The company emphasized that it “remains committed to its recommended cash offer for Sky announced on December 15, 2016. We note that no firm offer has been made by Comcast at this point. A further statement will be made if appropriate.”

On Discovery’s quarterly earnings call, CEO David Zaslav said Comcast’s salvo only validated Discovery’s international mission, which has expanded of late. Veteran analyst Craig Moffett with MoffettNathanson later issued a note determining “a mix of good and bad” for Comcast shareholders. “Unfortunately, the bad outweighs the good.”

On the plus side, he pointed out, the all-cash deal would satisfy investor demand for greater leverage in pursuit of distribution clout in Europe and a valuable new pipeline for its own NBCUniversal content. Outweighing that, though, “The underlying technology here is satellite, and Comcast will have to twist themselves into knots to explain why satellite distribution won’t be just as obsolete in Europe as it already is in the U.S.” Moffett noted that the word “satellite” never appeared in the investor presentation accompanying this morning’s conference call.

While Sky does provide broadband services, Moffett explained, its business is resale, not facilities-based and therefore lacks competitive advantage as it would in the U.S. marketplace.