Disney and Fox Sell Sky Shares to Comcast

Comcast moves step closer to taking over FTSE 100 broadcaster as Disney/Fox agree to sell their minority shareholding

Morningstar News Team 26 September, 2018 | 3:49PM Allan C. Nichols
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Sky Bidding War

US cable giant Comcast (CMCSA) has moved closer to taking full ownership of FTSE 100 broadcaster Sky (SKY) after 21st Century Fox (FOXA) and Disney (DIS) agreed to sell their shares in Sky.

Comcast beat Disney/Fox to Sky after a weekend auction in which it tendered a higher share offer for the UK broadcaster.

Disney owns Fox's entertainment assets and it will now sell its stake in Sky rather than continue as a shareholder.

Sky shareholders will vote by 11 October whether to accept the offer. Morningstar analysts predicted at the start of the week that uncertainty over Disney/Fox's stake in Sky would be the major obstacle to gaining shareholder approval: "With Comcast’s offer more than 10% higher than Fox’s, we expect Comcast’s offer will win the day despite Fox already owning 39% of Sky’s shares."

Analyst's View - Allan C. Nichols

Sky shares soared on Monday as Comcast successfully outbid Fox over the weekend with a £17.28 offer for the FTSE 100 broadcaster.

Comcast’s bid beat Fox’s £15.67 per share offer, and both bids were significantly higher than previous offers of £14.76 and £14 respectively. The offers are great for Sky shareholders, but Morningstar analysts believe Comcast will struggle to generate a decent return on its investment, as we already thought the previous offers exceeded Sky’s fair value. We are now increasing our fair value estimate for Sky to Comcast’s offer price of £17.28.

Comcast’s higher bid adds £4.4 billion to the purchase price versus its previous offer, taking its total bid to £30.6 billion. This additional payment is only 3.3% of Comcast’s market capitalisation. Further, if we assume Comcast overpaid by 40% for Sky’s equity, the shareholder value lost would equal about $2.50 per share. So, while we think Comcast got carried away in the bidding it won’t be too detrimental to our Comcast fair value estimate.

 

 

 

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