Comcast tackles Fox with £22bn Sky offer

US media company Comcast has today (Wednesday) announced a firm superior cash proposal to acquire Sky, the European pay-television broadcaster operated by rival media company 21st Century Fox, with Sky withdrawing its recommendation for the offer submitted by Fox last year.

Comcast’s announcement of a superior cash proposal of £12.50 (€14/$17) per share represents a 16 per cent increase in value over the existing 21st Century Fox offer, which values Sky at around £19bn. Comcast’s superior cash proposal implies an equity value of £22bn for Sky.

Comcast said a combination would bring “attractive financial benefits” to its shareholders and is expected to be accretive to Comcast’s free cash flow per share in year one.

Comcast chairman and chief executive, Brian Roberts, said in a statement: “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.

“Comcast intends to use Sky as a platform for growth in Europe. 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 nine per cent to 25 per cent of company revenues.”

Comcast first outlined an offer at the same £12.50 per share price in February and said it would continue to engage with Sky’s independent directors in a bid to gain a recommendation for its deal.

Today’s news comes just weeks after US media company Walt Disney was told it will have to make a full takeover bid for Sky, even if the UK competition regulator scuppers Rupert Murdoch’s attempt to seize full control.

In December, Disney announced a $52.4bn (€42.1bn) deal to acquire a significant share of 21st Century Fox’s business interests in an agreement that would ultimately lead to it securing control of Sky and media company Star India.

Fox, which already owns 39 per cent of Sky, is seeking to secure full control of the company by acquiring the 61 per cent stake it doesn’t already own. If the UK’s Competition and Markets Authority gives the green light to Murdoch’s bid and Disney is then allowed to conclude its Fox deal, Sky would come under full ownership of Disney.

However, Disney in December made an alternative proposal should Fox’s bid for Sky fail to gain regulatory approval. It approached the UK takeover panel, the city watchdog for corporate deals, stating it did not wish to be forced to pursue a full takeover of Sky if Murdoch failed to secure control. The takeover code stipulates that companies are normally obliged to make an offer if they acquire a stake exceeding 30 per cent.

Fox today said it remained committed to its recommended cash offer for Sky announced in December, and is currently assessing its options. “A further announcement will be made in due course,” it told the Reuters news agency.

However, in a statement today Sky said: “As a result of the announcement of this higher cash offer, the Independent Committee is withdrawing its recommendation of the offer announced by 21CF on 15 December 2016… and is now terminating the Co-operation Agreement entered into with 21CF on the same date.

“Accordingly, certain provisions of the Co-operation Agreement will cease to apply including the obligation on 21CF to pay a break fee of £200m. The Co-operation Agreement ensures, however, that certain obligations on 21CF continue after such termination, including, unless the Independent Committee agrees otherwise, that: (i) the 21CF Offer cannot close without the approval of at least a majority of independent Sky shareholders and (ii) 21CF will continue to be bound by the standstill provisions agreed to in the Co-operation Agreement.

“The Independent Committee is mindful of its fiduciary duties and has consistently sought to maximise value for all shareholders. At this time, the Independent Committee notes that both offers are subject to pre-conditions and neither offer is currently capable of being put to shareholders.

“The Independent Committee intends to co-operate fully with both parties to secure the relevant approvals in order to satisfy the preconditions for both offers. Until the relevant pre-conditions are satisfied, Sky shareholders are advised to take no action.”

Sky is a major sports broadcaster in Europe and is the primary domestic rights-holder of football’s English Premier League in the UK.