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Comcast (CMCSA) Outsmarts 21st Century Fox to Buy 61% of Sky
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Comcast (CMCSA - Free Report) finally succeeded in outbidding 21st Century Fox (FOXA - Free Report) for European pay-TV player, Sky Plc’s 61% stake in a three-round regulated auction held last Saturday.
The U.S. cable-TV giant’s offer of almost £30 billion ($40 billion) or £17.28 per share was superior to Fox’s bid of £15.67 a share. Notably, Fox already owns 39% of Sky, which it agreed to sell to Disney (DIS - Free Report) .
The latest price reflects 125% premium to Sky’s closing price of £7.69 as of December 2016, when Fox made its first offer of £10.75 per share, valuing the company at almost $23 billion.
Following this news, Sky’s shares surged almost 8.7% to £17.22 in early morning trading in London, per Bloomberg.
What Comcast Gains From the Deal
Sky operates in the United Kingdom, Austria, Germany, Ireland and Italy, and reaches almost 23 million customers. Its popularity is primarily driven by offerings like the English Premier League (EPL). Notably, Sky has the rights to show 128 EPL soccer matches for three seasons, from 2019 to 2020.
Moreover, Sky has the exclusive rights to distribute HBO’s content like Game of Thrones, making it a valuable asset for pay-TV providers. It is also involved in developing original content.
Sky’s acquisition will help Comcast expand in Europe, where pay-TV penetration is rapidly increasing. This diversifies its top-line source as North-American pay-TV market saturates. According to Reuters, post the deal Comcast will become world’s largest pay-TV operator with 52 million.
Moreover, Comcast will be able to leverage Sky’s streaming offering — Now TV — that has almost 2 million users to fight Netflix (NFLX - Free Report) , which is currently dominating the streaming market.
What Will Fox Do With its 39% Sky Stake?
Sky has asked its shareholders, including Fox, to accept Comcast’s offer that has a deadline set at Oct 11. Per CNBC, Comcast requires approval from the 50% of the 61% shareholders to proceed with the deal.
Reportedly, Fox is looking into options for its 39% stake. Per Bloomberg, the company can get almost £11.6 billion or $15.2 billion for the stake.
Since, the minority ownership will not provide much leverage to Disney (which will ultimately own the stake post Fox’s asset acquisition) in European pay-TV market, it may ask Fox to sell the stake.
The stake sell would help in reducing Fox’s debt level that will ultimately benefits Disney, which would have assumed Fox’s net debt at $13.8 billion, post-acquisition.
Moreover, the stake sell would prevent distraction as Disney gears up to launch its own streaming service (expected late 2019).
However, if Fox finally decides to sell its minority stake, Comcast’s leverage will increase significantly, hurting its capability for further acquisitions.
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
Image: Bigstock
Comcast (CMCSA) Outsmarts 21st Century Fox to Buy 61% of Sky
Comcast (CMCSA - Free Report) finally succeeded in outbidding 21st Century Fox (FOXA - Free Report) for European pay-TV player, Sky Plc’s 61% stake in a three-round regulated auction held last Saturday.
The U.S. cable-TV giant’s offer of almost £30 billion ($40 billion) or £17.28 per share was superior to Fox’s bid of £15.67 a share. Notably, Fox already owns 39% of Sky, which it agreed to sell to Disney (DIS - Free Report) .
The latest price reflects 125% premium to Sky’s closing price of £7.69 as of December 2016, when Fox made its first offer of £10.75 per share, valuing the company at almost $23 billion.
Following this news, Sky’s shares surged almost 8.7% to £17.22 in early morning trading in London, per Bloomberg.
What Comcast Gains From the Deal
Sky operates in the United Kingdom, Austria, Germany, Ireland and Italy, and reaches almost 23 million customers. Its popularity is primarily driven by offerings like the English Premier League (EPL). Notably, Sky has the rights to show 128 EPL soccer matches for three seasons, from 2019 to 2020.
Comcast Corporation Price and Consensus
Comcast Corporation Price and Consensus | Comcast Corporation Quote
Moreover, Sky has the exclusive rights to distribute HBO’s content like Game of Thrones, making it a valuable asset for pay-TV providers. It is also involved in developing original content.
Sky’s acquisition will help Comcast expand in Europe, where pay-TV penetration is rapidly increasing. This diversifies its top-line source as North-American pay-TV market saturates. According to Reuters, post the deal Comcast will become world’s largest pay-TV operator with 52 million.
Moreover, Comcast will be able to leverage Sky’s streaming offering — Now TV — that has almost 2 million users to fight Netflix (NFLX - Free Report) , which is currently dominating the streaming market.
What Will Fox Do With its 39% Sky Stake?
Sky has asked its shareholders, including Fox, to accept Comcast’s offer that has a deadline set at Oct 11. Per CNBC, Comcast requires approval from the 50% of the 61% shareholders to proceed with the deal.
Reportedly, Fox is looking into options for its 39% stake. Per Bloomberg, the company can get almost £11.6 billion or $15.2 billion for the stake.
Since, the minority ownership will not provide much leverage to Disney (which will ultimately own the stake post Fox’s asset acquisition) in European pay-TV market, it may ask Fox to sell the stake.
The stake sell would help in reducing Fox’s debt level that will ultimately benefits Disney, which would have assumed Fox’s net debt at $13.8 billion, post-acquisition.
Moreover, the stake sell would prevent distraction as Disney gears up to launch its own streaming service (expected late 2019).
However, if Fox finally decides to sell its minority stake, Comcast’s leverage will increase significantly, hurting its capability for further acquisitions.
Moreover, the Sky deal is not expected to be accretive immediately. This doesn’t bode well for investors of this Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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