27 February 2018
| Natalie Bannerman
Comcast is in talks for a potential $31 billion cash deal to acquire a majority stake in Sky, surpassing 21st Century Fox’s $25.7 billion offer made last year.
Comcast’s possible cash proposal of
£12.50 per share represents a 16% increase
over the existing 21st Century Fox offer for Sky.
The acquisition is set to bring a number of financial
benefits for Comcast’s shareholders, with the
company predicting that in year one it will be "accretive to
Comcast’s free cash flow per share".
Speaking on the announcement, Brian
Roberts, chairman and CEO of Comcast Corporation, said: "We
think Sky is an outstanding company. It has 23 million
customers and leading positions in the UK, Italy, and Germany.
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."
In a statement, the company said that the deal would enhance
the entertainment, distribution, and technology leadership of
Comcast, as well as expand Comcast’s international
footprint. Adding that: "The combined business would create
compelling opportunities for growth and innovation."
"Comcast intends to use Sky as a platform for growth in
Europe," added Roberts. "We already have a strong presence in
London through our NBCUniversal international operations, and
we intend to maintain Sky’s UK headquarters.
Adding Sky to the Comcast family of businesses will increase
our international revenues from 9% to 25% of Company
Rupert Murdoch's 21st Century Fox bid for Sky has been met
with a lot of controversy. Back in July, UK Culture Secretary
Karen Bradley said, after the three-month investigation by
Ofcom, in a statement to MPs that she was referring the deal to
Britain’s Competition and Markets Authority
At the time, Bradley said: "The proposed entity would have
the third largest total reach of any news provider –
lower only than the BBC and ITN – and would,
uniquely, span news coverage on television, radio, in
newspapers and online."
Later in the year, the UK's CMA outlined its probe into the
Fox takeover bid, saying it would assess how a deal will impact
media plurality and broadcasting standards in the UK. In
response, Sky warned it could close Sky News should regulators
block the acquisition.
In January, the competition regulator released its
provisional findings into the probe and said that the Fox offer
would not work against the public interest but in terms of
choice and plurality the takeover could go against public
Commenting on the news, Paolo Pescatore, vice president of
multiplay and media at CCS Insight, said: "This puts a real
spanner in the works. We’ve always said that
Comcast has been sniffing around Europe. The bid offers
plentiful opportunities for growth beyond the US and
we’ve yet to see the same level of consolidation
seen in this market. It is unsurprising that there is
significant interest in Sky as it owns a wealth of content and
has done a great job of moving into IP distribution. We
strongly expect to see a bidding war for Sky. It has all the
assets to compete with the web giants."
According to Martin Scott, head of video strategies and
principal analyst at Analysys Mason, Comcast needs a new source
of growth because the North American pay-TV market has already
peaked. He says that pay-TV retail revenue hit USD117.8 billion
in North America in 2017, up USD1.0 billion year-on-year, but
now faces a 10% decline over the next five years, whereas The
Western European market remains buoyant, making makes
investment in Europe appealing for the major US players.
In addition, Scott’s figures show
that Comcast’s revenues outside the USA would
grow from 9% of revenues to 25% (based on 2017 earnings) and in
return Comcast can help fund Sky’s
Comcast had the highest organic growth of
companies listed in Vertical Systems Group's latest US
leaderboard of 2017 Ethernet market-leaders, growing its base
of Ethernet ports appreciably without an acquisition.
21st Century Fox. Brian Roberts,
UK Competition and Markets Authority