Yahoo News Gideon Spanier: Sky bid battle could spark frenzy of UK media deal-making
The £26 billion takeover battle for Sky is approaching its endgame. Comcast, the US telecoms and media giant, has edged ahead in the race to buy Europe’s biggest pay-TV company and has twice outbid Disney/Fox.
Rupert Murdoch’s Fox has been acting as a surrogate for Disney after he sensationally agreed to sell all his entertainment assets, including his stake in Sky, in December.
Disney/Fox received a final green light for its Sky bid from UK regulators last week and increased its offer from £10.75 to £14 a share.
Comcast, which hasn’t faced the same regulatory hurdles, responded on the same day by hiking its offer from £12.50 to £14.75 on a night of drama as England were playing their World Cup semi-final against Croatia.
Comcast boss Brian Roberts’ new offer could be a knockout blow. It values Sky at about £26 billion, or a heady multiple of about 14.7 times annual profits before exceptional items.
Hedge funds are still talking up the price and claim it could reach as much as £18 a share. But a source familiar with the bidding believes the price won’t go much higher as it is already 92% above its level before the first takeover approach.
Crucially, Disney boss Bob Iger is close to sealing a $71 billion (£54 billion) deal to buy the other Fox entertainment assets, including its Hollywood film studio and TV interests, in New York.
Iger may feel that gobbling up Sky as well is too much of a stretch, despite his previous insistence that he could afford it, and Disney has told investors it “may elect not to provide” the financing required to raise its offer above £14.
Comcast has made a bid for Fox but faces an uphill struggle because US authorities are appealing a court decision to let rival AT&T buy Time Warner in a similar telecoms-media merger.
There is a school of thought that Sky could still be undervalued at £26 billion compared with online giants such as Netflix, which is the big threat to all the traditional TV and film companies and has prompted Murdoch to sell.
Before Netflix’s (admittedly lacklustre) results last night, the streaming firm had a market capitalisation of about £140 billion and 125 million subscribers who each buy only one product, video streaming. That made each Netflix subscriber worth about £1100 per product.
By contrast, Sky is valued at £26 billion and has 23 million subscribers who subscribe to 63 million products, which include pay-TV, broadband, mobile and streaming service NOW TV. That makes each Sky subscriber worth about £1100 in total but just £420 on a per-product basis.
However, a senior City figure dismisses the idea that a buyer might value the FTSE 100 satellite broadcaster in the same way as Netflix as wishful thinking.
Murdoch was reluctant to sell any of his assets to Roberts because of long-standing tension between their families but the veteran media mogul may have “let go” emotionally.
The pivotal moment came when Murdoch first agreed a deal with Iger, rather than hand Fox and Sky to his sons James and Lachlan. That’s when Roberts knew there was a chance for Comcast because Murdoch had shown he was a seller.
As the talks over Sky have intensified, the Murdochs have become less involved, with James likely to seek pastures new with a couple of billion dollars in his pocket. Iger and Roberts are now the key decision-makers.
The next crucial date is July 27 when Fox and Disney shareholders are set to approve the US transaction, which means the likelihood of a Comcast counterbid all but vanishes. Buying Sky would be more than a consolation for Roberts. Comcast is arguably a more natural fit than Disney, which doesn’t have the same experience of telecoms and going direct to the consumer.
Disney has until the end of August if it wants to increase its bid for Sky.
Whatever happens, Sky is going to be sold and become part of a global giant with profound implications for the rest of UK media. ITV, Channel 4 and the BBC will look smaller by comparison with fewer resources.
Comcast and Disney have committed to invest if they buy Sky but it is a worrying time for those who believe British-owned companies should play a leading role in our creative industries. ITV could be a takeover target for Virgin Media owner Liberty Global while the future of UKTV is uncertain as its owners, the BBC and Discovery, mull options, including a break-up.
Sky has received a lot of flak over the years because of the Murdoch connection and yet it has undeniably been a British success. The end of Sky as a listed UK company signals that media has moved from a local to a global battle for supremacy.
