Comcast raises its bid for Britain’s Sky to $32.5 billion

Tune in to the M&A channel to view the latest in the top prime time drama over Britain’s Sky.

Topping Rupert Murdoch’s Twenty-First Century Fox’s bid for Britain’s Sky, Comcast Corp raised its offer to $32.5 billion.

Previously, Fox had offered to pay 14 pounds per share for Sky’s share, which amounts to a 12% premium on Comcast’s earlier offer. Comcast however has increased its cash offer to 14.75 pounds per share.

As of Wednesday, Sky’s shares closed at 15.15 pounds.

Comcast stated, its all-cash offer has been recommended by Sky’s independent committee of directors.

The fight for Britain’s Sky, a leading pay-TV group should be seen in the wider context of media giants battling to expand their footprint in the global entertainment industry to edge out new competitors including Amazon.com and Netflix.

Separately, Walt Disney and Comcast are locked in a separate $70 billion plus battle to acquire the bulk of Fox’s assets, which incidentally include Sky. Last month, Disney had already secured conditional U.S. approval to acquire Fox’s assets last month, which gives it an edge over Comcast’s bid.

According to Case Equity Partners, a Hong Kong-based hedge fund, the fact that Disney is better placed in acquiring Fox’s U.S. media assets means Comcast is likely to fight even harder to get Sky.

“Today’s Fox bid is unlikely to be the end game as we see a final Sky deal outcome at well over 15 pounds per share,” said Michael Wegener, a managing partner at Case Equity Partners.

The Battle for Sky

With its repertoire of content which includes sports and original drama, Sky has 23 million subscribers across Europe.

“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,” said Fox.

Fox’s offer represents a premium of 82% over Sky’s shares in 2016 before the takeover saga began; its offer also represents a multiple of 21 times Sky’s 2017 earnings per share.

For Sky this battle over its assets is great since it places it in a win-win situation.

British regulators have indicated, if Disney were to acquire Fox, which includes its 39% stake in Sky, it would have to offer the same price for the remainder of Sky’s asset. Shareholders see this as an implied tactics to place a higher floor on Sky’s shares.

In recent months, investors including Elliott Management, and Crispin Odey have bought into Sky and have demanded that the independent directors secure a better deal.

“It’s too low,” said Odey, a former son-in-law of Murdoch whose hedge fund is a Sky shareholder, in reference to Fox offer. “Disney’s internal forecasts now, on the basis of the cash flows they’ve published for Sky, would value it at 16 pounds”.

According to Fox, while Disney has agreed to the additional debt Fox would have to take saying it would reimburse Fox by around 1 billion pounds if it were to succeeds in acquiring Sky at that price; however it would not follow through with this deal if the Disney-Fox transaction fails.

A hedge fund manager views this pledge as a sign that Disney is likely to back Fox in the battle for Sky.

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