Shareholders in pay-TV firm Sky (SKY) have until 11 October to decide but to all intents and purposes the protracted takeover saga which commenced with a £10.75 bid from 21st Century Fox in December 2016 is at an end.
US media conglomerate Comcast, whose interest emerged earlier in 2018, bested Rupert Murdoch’s Fox in an auction process mandated by the Takeover Panel at the weekend.
THE BACKGROUND
Comcast, which owns Universal and NBC, offered £17.28 per share - a more than 60% premium to Fox’s first bid - and adding up to £30bn in total. Sky’s board is recommending this cash offer be taken up immediately. Shares in Sky are up 8.8% to £17.24.
As a quick reminder of the potted history behind the bid. Fox currently owns 39% of Sky and was looking to acquire the remaining 61% stake for £10.75 per share when Disney agreed a takeover of its media assets.
Comcast then launched its own higher offer for Sky at £12.50. Both deals were given the regulatory green light in early summer 2018.
In June US media conglomerate Comcast launched a $65bn rival bid to Disney for Fox’s entertainment arm. Disney responded with its own higher $71.3bn offer for the Fox assets, which was enough to beat off Comcast’s interest.
ANALYST’S VIEW
Shore Capital analyst Roddy Davidson notes Comcast has paid a hefty price for Sky ‘substantially’ in excess of how much he reckons the business is worth at a price to earnings ratio of 24.4 times based on his forecasts.
Davidson reckons Sky shareholders should recycle the proceeds from the deal into ITV (ITV). He comments: ‘The battle for Sky also provides a clear reminder of the strategic value of media businesses with a strong viewer base and content proposition - two core bull points for our preferred play in this space, ITV.
‘In addition to its dominance of the commercial TV market and unrivalled ability to deliver a mass market audience to advertisers via a trusted medium, ITV is (in contrast to Sky) a major (and growing) international content business with operations in 12 markets producing around 8,500 hours of programming in 2017 across a wide range of genres for a diverse customer base (including the BBC, Netflix, CBS, Fox, NBC, Amazon,) and encompasses a well-established international distribution business.'
