Two of the world’s largest media conglomerates may end up duking it out over a potential game-changing acquisition.
Sky is a telecommunications company that serves the United Kingdom and provides landline, broadband internet, and cellular phone service to both consumers and businesses alike. The company was founded in 1990, and through successful mergers, acquisitions, and service offerings has become the top communications company providing service in Britain. Now the powerful U.K. company is being wooed by multiple suitors, and it is expected to turn into an all-out bidding war,
An original purchase plan was developed by Rupert Murdoch and Twenty-First Century Fox, who had planned together with Walt Disney Company to obtain control of the biggest communications company in the U.K. The anticipated cash deal would give Murdoch ownership of the 61% of Sky that he did not own.
However, negotiations stalled as regulators began to exhibit concerns over Murdoch having too much power over the media in the U.K. if the purchase was allowed to go through. With the deal anticipated to proceed, Comcast, the owner of NBC, as well as Universal Studios, has swooped in and put in an all-cash offer of 31 billion dollars to acquire the company. This buying price puts Comcast at paying 12.50 pounds for the share, which exceeds the price proposed in the Murdoch and Fox deal that would purchase the company at approximately 10.75 pounds.
The original deal with Rupert Murdoch and Disney for the company was an effort of the Fox entity to purchase the company and then resell it at Disney, along with some other assets for a total of $52 billion USD. When asked what spurred the unsolicited offer, Comcast’s CEO Brian Roberts was quoted as saying, “Sky and Comcast are a perfect fit: we are both leaders in creating and distributing content.”
There is some speculation that the offer was made due to a long-standing rivalry as well as the fact that Comcast had attempted to purchase Disney in the past and failed to achieve a deal back in 2004. There was also an attempt to engage in a $60 billion deal last year with Fox which Comcast ultimately lost to Disney. Media owners have been embarking on much more aggressive deals as the availability of such online offerings by companies such as Netflix and Amazon have reduced the amount of subscription service that they sell to their customers. Whatever the reason for the offer, its presence is now anticipating an increase in the offer from Fox, which could be the start of a bidding war for the communications company.
While shares of stock in Sky have jumped more than 20%, stocks for Comcast, Fox, and Disney have begun to drop in anticipation of the potential for a bidding war. The shares had also been trading higher than anticipated as they are already expecting increased future earnings due to acquiring of Premier Soccer league rights at lower than expected costs. With Sky stock already trading higher and anticipation of increased revenue, shareholders are demanding a higher offer. Even with the increase in shares, Sky is urging investors to hold tight as the announcement by Comcast does not represent a firm offer.
It’s definitely possible that a bidding war may end with an auction-style purchase, but both corporations have hurdles in their way as well as benefits that could sway the deal. Before it can even be considered, Comcast must speak with Sky’s finance director and gain the support of their independent directors if the offer is to even be considered. Additionally, they will have to contend with the fact that the chairman is Rupert Murdoch’s son James.
Fox also has obstacles to contend with if it wins the bidding against Comcast as regulatory concerns may prevent the acquisition by Fox of complete control of Sky despite whatever offer is made. Comcast can use this to their advantage and has publicly made their announcement most likely to begin the clock on the regulatory timetable. The media ministry of Britain has set the date of June 14th to give his verdict on the issue addressed by regulators in the Murdoch deal, which may give Comcast only a small window of time to secure the deal and get approval. Comcast says their deal would involve obtaining 50% of the company.
Who will be the victor and achieve the spoils in this battle remains to be seen, but most watching closely feel that a bidding war is on the horizon.