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Comcast Raises Bid for Sky as Regulatory Decision Accelerates Sale Process

Heat Behind Sky Auction Stirs Speculation Comcast Will Back Off Hunt for Other Fox Assets

SUN VALLEY, Idaho — Comcast moved quickly on Wednesday to counter 21st Century Fox’s latest bid for Sky, raising its offer to $34 billion on the same day that Fox upped its buyout bid for the European satellite TV provider.

Comcast said its higher bid has been recommended by Sky’s committee of independent directors evaluating the swirl of bidding for the satcaster. Earlier in the day, the same committee recommended Fox’s higher bid but reversed course after receiving the outline of Comcast’s higher offer.

Comcast’s renewed focus on the bidding for Sky has stirred speculation that the company is shifting its focus to winning the race to acquire Sky and backing off of its duel with Disney for major assets of 21st Century Fox. Comcast is vying against Fox for control of Sky, and it is in the midst of a bidding war with Disney for major assets of Fox. Those assets include Fox’s existing 39% stake in Sky, with the hopes that Fox will be able to close its long-pending takeover of Sky soon in order to deliver 100% of Sky to Disney or Comcast.

With Comcast’s quick action on Sky, the question now turns to whether Fox or Disney will return fire with a sweetened offer for Sky. By U.K. law, Sky shareholders now have 60 days to study Comcast’s offer and decide whether to accept Comcast’s tender offer. 21st Century Fox declined to comment other than a statement acknowledging “the announcement made by Comcast Corporation of an increase in its offer for the entire issued and to be issued share capital of Sky.”

The sale process on Sky has been accelerated by the decision earlier this week by the U.K.’s regulatory body that oversees corporate takeovers. The Takeover Panel ruled that Fox had to increase the value of its bid because of its “chain principle” theory that Disney’s bid for Fox is linked to Sky. The fact that Disney last month upped its bid for all of the Fox assets means that the value of Fox’s existing 39% stake in Sky has gone up. As such, Disney’s higher $71.3 billion bid for Fox means that it has set a floor price for fair market value for Sky shareholders.

“Comcast has long admired Sky and believes it is an outstanding company and a great fit with Comcast,” Comcast said in announcing its new Sky bid. “Today’s announcement further underscores Comcast’s belief and its commitment to owning Sky.”

The bid that Fox made on Wednesday valued all of Sky at about $32.5 billion, or 14 pounds per share, compared to Comcast’s last offer in April of about $31 billion. Comcast’s revised offer values Sky at 14.75 pounds per share. Comcast said it expects its tender offer to Sky shareholders to close before the end of October.

The Takeover Panel decision is said to have come as a surprise to Comcast in that it accelerated the bidding process for Sky. According to an informed source, Comcast had been focused on assembling yet another bid for the larger group of 21st Century Fox assets. Disney initially set a deal to buy most of 21st Century Fox on Dec. 14 for $52.4 billion. On June 13, Comcast made a $65 billion all-cash counteroffer for Fox. Disney responded on June 20 with its $71.3 billion bid that has been endorsed by the Fox board of directors.

Disney and Fox have set shareholder votes on the buyout bid for July 27. That set a timetable for Comcast to respond with yet another bid for the larger collection of Fox assets. According to an informed source, Comcast had been focused on its options for a higher all-cash offer for Disney by the July 27 deadline when the U.K. regulatory decision forced them to shift their attention back to Sky with the expectation that Sky’s board will move quickly once U.K. regulators give the OK for Fox to proceed with its most recent bid for Sky, a greenlight that had been expected to come by week’s end. Comcast has already been cleared by regulators to acquire all or part of Sky.

Comcast chairman-CEO Brian Roberts is monitoring the fast-moving developments from his perch at at the annual Allen & Co. conference for media and tech moguls, where the guest list includes Disney chief Bob Iger and 21st Century Fox chairman Murdoch. The drama surrounding Comcast and Disney’s battle for Rupert Murdoch’s empire has been a hot topic of conversation at the gathering. Roberts declined to comment on the Sky and Fox bidding process.

Industry sources said some of Roberts’ lieutenants at Comcast have gradually cooled their zeal to go toe-to-toe with Disney for the Fox assets, particularly if Comcast has a strong shot at acquiring control of Sky. Sources said there is concern that an all-cash bid to top Disney’s latest offer for Fox could put Comcast in tough straits with a heavy debt load and other concerns for investors and bondholders.

Sky is a prized part of the Fox empire because of its subscriber strength in the U.K., Ireland, Germany and Italy. Sky is seen as s seen as vital infrastructure for global direct-to-consumer streaming services that Disney and Comcast both seek to develop. Fox’s international assets in general are a big part of the appeal for Comcast and Disney, which both aim to diversify internationally as the media and entertainment businesses become more global in scope.

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