Comcast Buys Sky

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Sky shareholders cheer Comcast's $40 billion knockout bid

Shareholders have until Oct. 11 to accept the offer.

September 24, 2018 - 8:42 am

By Hadas Gold

(CNN Money) -- A great day for Comcast is turning into an even better one for Sky shareholders.

The American cable giant outbid 21st Century Fox and its powerful backer, Disney, on Saturday in an auction for control of the European pay-TV broadcaster.

Comcast's final bid was £17.28 ($22.65), valuing Sky at £30.6 billion ($40.1 billion). That was way up on its previous offer of £14.75, and Sky's closing share price on Friday.

The stock moved fast Monday to catch up, gaining over 8.5% to £17.22 ($22.58) in early London trading.

Comcast has given Sky shareholders until October 11 to accept the offer.

Fox is now considering what to do with the 39% of Sky it owns, and which it had agreed to sell to Disney along with its entertainment assets under a deal that was approved by both sides in July.

Fox said it would "make a further announcement in due course."

"Sky is a remarkable story and we are proud to have played such a significant role in building the incredible value reflected today in Comcast's offer," it said.

A committee of independent directors at Sky, which does not include board members with close ties to Fox, has recommended that shareholders accept the Comcast offer.

Sky and its 23 million subscribers are attractive assets to US media companies that want to expand their operations to Europe and bolster their defense against an onslaught from Netflix and Amazon.

It also carries top original shows and valuable premium sports content, such as Premier League soccer.

Comcast CEO Brian Roberts called the auction "a great day for Comcast" in a statement on Saturday.

"This acquisition will allow us to quickly, efficiently and meaningfully increase our customer base and expand internationally," he said.

"We couldn't be more excited by the opportunities in front of us. We now encourage Sky shareholders to accept our offer, which we look forward to completing before the end of October 2018."

Roberts is likely to face questions from investors over his offer of £17.28, which is more than double the price of Sky stock before the takeover saga started in December 2016.

"Looking at the stock price before the first Fox bid, it's hard not to come to the conclusion that either the stock was woefully undervalued by the market, or is much overrated by the latest bid," Laith Khalaf, a senior analyst at investment platform Hargreaves Lansdown, told CNN.

"Comcast now needs to demonstrate to its shareholders in the coming years that this deal was worth it," he added.

One major unanswered question is what will happen to the 39% stake in Sky that is owned by Fox.

Brian Wieser, senior research analyst at Pivotal Research Group, wrote in note to clients that Disney could sell the stake and invest the proceeds in expanding streaming services such as Hulu.

Comcast owns 30% of Hulu, and it's also possible that some sort of swap could be engineered.

"Presumably both Disney and Comcast will find that it is in their mutual best interests to allow each party to consolidate as much of Hulu and Sky, respectively, as possible," said Wieser.

Mark Thompson contributed reporting.

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