Comcast Offer Sets Up Sky Bidding War

Sky has now removed its previous recommendation that shareholders accept 21st Century Fox’s offer of £10.75 per share

Allan C. Nichols 25 April, 2018 | 3:05PM

Sky Bidding War

Comcast has today formalised its intention to buy UK satellite broadcaster Sky (SKY), offering £12.50 a share or £22 billion. With this formal offer, the independent board of Sky removed its previous recommendation that shareholders accept 21st Century Fox’s offer of £10.75 per share. They also removed Fox’s liability of £200 million break fee if the deal wasn’t completed and stated an offer would require 50% of the vote of independent shareholders.

This requirement removes Fox’s biggest advantage of already locking up 39% of the vote. We believe this increases the likelihood of a bidding war for Sky. However, Morningstar equity analysts also recognise that Fox and Disney – which has agreed to acquire Fox – have already gone through the majority of the regulatory review process, while Comcast has not. Thus, a deal could still be reached more quickly through Fox or Disney than through Comcast, meaning that the time value of money favours Fox and Disney.

Additionally, while a bidding war benefits Sky shareholders, it doesn’t benefit Fox, Disney, or Comcast shareholders. We believe the £12.50 offer fully values Sky, including the improved performance since Fox’s original offer in 2016 and the lower price agreed for the next three years of Premier League football.

Thus, any further increases in the offer would be a negative for the shareholders of the acquiring company, which we believe will keep a lid on a bidding war. Therefore, for now, we are maintaining our £12.40 per share fair value estimate for Sky. The Sky share price is up nearly 4% in London at £13.50.

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Securities Mentioned in Article
Security NamePriceChange (%)Morningstar
Rating
Sky PLC1,565.50 GBX-0.48
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Allan C. Nichols  Allan C. Nichols