Sky Shares Rise as Comcast Trumps 21st Century Fox Offer

US firm Comcast has upped its offer for the UK broadcaster just a day after 21st Century Fox boosted its bid to £24bn

Allan C. Nichols 12 July, 2018 | 9:00AM
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Today saw the latest twist in the long takeover battle for Sky (SKY) with US firm Comcast (CMCSA) offering £14.75 per share in an attempt to scupper 21st Century Fox's (FOXA) £14 per share bid, which it made on Wednesday. Sky shares rose abpve £15 on Thursday on the news.

Yesterday Morningstar equity analysts raised their fair value estimate for Sky to £13.78, the same price as the Fox offer minus the 22p dividend. We already believe that Fox’s offer is above Sky’s independent fair value, and creating additional synergies to justify continually higher prices is becoming more difficult.

With Fox’s original offer for Sky we saw advantages for its bid. First, it already owned 39.1% of Sky’s shares, so only needed another 11% of shareholders to vote for it and second, Comcast needed to clear the regulatory process.

This new deal from Fox has been recommended by the independent directors of the board. As part of the agreement with the board, Fox has the right to change the offer from a scheme of arrangement to a contractual offer, removing the requirement of 50% of votes excluding Fox.

The independent directors that combined own just over 0.5% of the shares all agreed to vote for this deal. Thus, Fox needs just 10.4% of the votes from other shareholders to close the deal. The deal is still dependent on final UK regulatory approval, which we believe is likely.

Timeline in the Battle for Sky

In December 2016, Fox announced it had made an offer to buy the rest of Sky it did not already own and in April 2017 the deal was approved by the European Commission.

The bid for Sky has been subject to UK regulatory scrutiny since March 2017 when the Government issued an "Intervention Notice" to look at the public interest concerns associated with the broadcaster being sold off to Murdoch-controlled 21st Century Fox, which already owns 39% of Sky.

The notice triggered investigations by media regulator Ofcom and UK competition regulator the CMA.

In December 2017, Walt Disney Company announced that it intended to buy 21st Century Fox.

In late January this year, the CMA found provisionally that the Fox takeover would not be in the public interest.

At the end of February 2018 Comcast made a bid of £12.50 for Sky, which had already accepted the Fox offer, subject to regulatory approval.

At the end of April 2018, Comcast formalised its offer for Sky, whose board removed the recommendation that shareholders accept Fox's earlier bid.

In June, the then Culture Secretary Matt Hancock said that the UK Government is likely to approve 21st Century Fox’s bid for Sky. This was then confirmed by the new Culture Secretary, Jeremy Wright, on July 12.


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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Comcast Corp Class A38.29 USD1.43Rating

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Allan C. Nichols  Allan C. Nichols

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