Comcast crashes Disney's Sky party by gazumping Fox

This is getting complicated.

by Adam Gale
Last Updated: 27 Feb 2018

Sky certainly is popular these days, at least among American media giants. The British TV-broadband-mobile provider now finds itself in a ‘love quadrilateral’ involving 21st Century Fox, Disney and Comcast. Here’s the gist.

American cable firm Comcast just made a £22bn offer for Sky. It was remarkably sweetly-delivered, for a unsolicited (if not yet hostile) takeover bid. ‘We hold the management of Sky in high regard and would welcome the opportunity to meet with them and the independent directors of Sky to discuss our plans for the business,’ Comcast CEO Brian Roberts said in a statement.

The only hitch is that Sky is already rather cosy with 21st Century Fox. The Murdoch family’s main business owns 39% of Sky and has made an offer for the remaining shares, which Sky’s board has already recommended. 

To give an idea of how close the two businesses are, the CEO of Fox, James Murdoch, also happens to be the chairman and former CEO of Sky. (For more on Sky's position, read the MT Interview with Sky CEO and Murdoch protégé, Jeremy Darroch).

Given Fox’s existing share, Comcast will need to win over the great majority of independent shareholders, which is why its offer is 16% higher than its rival’s. Sky shares jumped 19% on the news.

Why does Comcast want Sky?

Roberts said Sky would be very valuable ‘as a platform for our growth in Europe’. Comcast is a huge player in American TV and internet, in many respects an equivalent to Sky in the US. It’s a natural tie-up, especially given the limited acquisition options Comcast has in the US, owing to its size.

The bigger question is why does Comcast want Sky now. It’s not Brexit, before you say anything. The window for opportunism has largely passed now that sterling has strengthened against the dollar - the pound is at $1.40, up from $1.21 last March.

It’s not even likely to be a direct response to Fox’s own offer –that was made at the end of 2016. Instead, the reason can be summed up in two words: Trump and Disney.

Lurking in the background, Disney is the fourth suitor in all this, an indirect bidder for Sky through its own takeover of Fox, which like the Fox-Sky deal, is currently awaiting regulatory approval.

Comcast and Disney are major rivals, the number one and two media conglomerates in the world by revenue, with revenues of $85bn and $55bn respectively. They clash primarily in film and TV production and theme parks, through Comcast’s subsidiary NBCUniversal.

Acquiring Fox will give Disney the edge in those two areas. Comcast already tried to get to Fox first, but failed. Taking Sky from under Disney’s nose would at least soften the blow.

Of course,that’s not to say Comcast acquiring Sky wouldn’t make sound business sense in its own right, which is where Donald Trump comes in. The President’s tax reforms gave Comcast a surprise $12.7bn windfall in late 2017, which rather helps when it comes to international M&A spending sprees.

Grab some popcorn and watch this space.

Image credit: Ploipiroon/Shutterstock

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