Comcast has made a £22 billion ($31 billion) offer for Sky, offering a 16% premium on the existing bid by 21st Century Fox for the European pay-TV giant. The surprise move comes as Fox’s year-old proposal to buy out Sky has become bogged down in regulatory review, although a final decision by British authorities could land within the next few months.
“We think Sky is an outstanding company. It has 23 million customers and leading positions in the U.K., Italy and Germany,” said Brian L. Roberts, Chairman and CEO of Comcast Corp. “Sky has been a consistent innovator in its use of technology to deliver a fantastic viewing experience and has a proud record of investment in news and programming. It has great people and a very strong and capable management team.”
Roberts added that, with Sky in the stable, international revenues would account for 25% of Comcast’s overall takings, up from the current 9%.
Fox and Sky both issued terse statements in response to Comcast’s new overture. “Since no firm offer has been made at this point, shareholders are advised to take no action,” Sky said, adding that “a further announcement will be made as and when appropriate.” Fox said merely that it remained “committed to its recommended cash offer for Sky announced on 15th December 2016.”
Comcast is well-versed in media mega-mergers, having acquired NBCUniversal in 2011, which created a cable and content giant. Rumors in the U.S. had suggested that Comcast would make a renewed bid for 21st Century Fox, but now it has set itself up in competition to Fox with its rival offer for Sky. And Fox itself is selling off its entertainment assets to Disney in another huge transaction that’s part of the wave of consolidation sweeping through the media and entertainment spheres.
Initial analyst reaction was that Comcast’s bid for Sky – a non-binding offer of £12.50 per share – was likely to succeed. “We expect this deal to go through as we do not think Fox (or Disney, who are acquiring the Sky assets as part of their purchase of various Fox assets) will want to get into a bidding war, especially given the complications surrounding Sky News,” said Liberum’s Ian Whittaker.
Fox already owns 39% of satcaster Sky and is seeking to buy out the remaining 61%. But it has struggled to obtain regulatory approval for its $15 billion bid, with the U.K.’s Competition and Markets Authority warning that the deal would concentrate too much of Britain’s media assets in the hands of Rupert Murdoch and his family. As late as last week Fox offered concessions to try to ease approval of the takeover, including “firewall” measures to help ensure the editorial independence of Sky News and insulate it from the Murdochs’ influence.
Sky is Europe’s largest pay-TV operator, with substantial bases in the U.K., Germany, and Italy, as well as a low-cost streaming service in Spain. It has been making a huge investment in original content to sit alongside the sports rights, particularly top-level soccer, that have always been a staple of the service.
“Pay-TV remains a very attractive product for the family. Sky is a family business,” Alice Enders of Enders Analysis told the BBC. “Despite these over-the-top services – Netflix, Amazon and so on – there is still a market for a premium pay-TV product, bearing in mind that Sky also has the very valuable football rights that a lot of fans want to see.”
In the U.K., Sky’s base is a sprawling campus in west London. NBCUniversal has a 1,300-employee central London headquarter for its international business. Roberts said both would continue to operate if Comcast gained ownership of Sky.
“Comcast intends to use Sky as a platform for growth in Europe,” Roberts said. “We already have a strong presence in London through our NBCUniversal international operations, and we intend to maintain Sky’s U.K. headquarters.”