Comcast surpasses Fox with a $31bn cash offer for Sky

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".

Brian RobertsSpeaking 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 revenues.”

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 (CMA).

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 interest.

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 European expansion. 

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.