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EXTRA: UK Government Clears Fox's Sky Takeover Bid As Comcast Ups Ante

Thu, 12th Jul 2018 14:53


LONDON (Alliance News) - Sky PLC shares were higher on Thursday after Comcast Corp raised its offer in its bidding war with rival Twenty-First Century Fox Inc as the latter received UK government approval over its own takeover bid.

Comcast, which owns NBCUniversal, on Wednesday increased its cash offer for Sky to 1,475 pence per share, taking the total value of the UK pay-TV operator to GBP26 billion.

The offer from Comcast trumped that of its rival Fox which Early Fox offered 1,400p for Sky earlier on Wednesday, valuing Sky at GBP24.5 billion. That topped Comcast's previous GBP22 billion offer.

Sky shares were up 2.8% at 1,535.50 pence, among the best performers in the FTSE 100 on Thursday - giving it market capitalisation about GBP26.36 billion.

"The stock market continues to believe that the winner of the Sky takeover battle will pay more than has currently been offered. Each time one of the suitors ups their bid, Sky's share price trades even higher," said AJ Bell's Russ Mould.

"The question is whether investors are being too optimistic or accurately predicting that Fox will increase its 1,400p offer," Mould added.

Comcast said its increased cash offer has been recommended by the Sky independent committee of directors. The US cable company noted that it has long admired Sky and believes it will be a great fit with its existing operations.

In the latest developments, Thursday new UK Secretary of State for Digital, Culture, Media and Sport Jeremy Wright gave clearance to Fox to acquire the 61% of Sky it does not already own.

Wright replaced Matt Hancock as culture secretary earlier this week after the latter was promoted to health Secretary as part of a UK government reshuffle.

"Having considered the responses to the consultation, the previous Secretary of State agreed with the parties a clarificatory change to Disney's undertakings and changes to the associated brand licensing agreement. In response to specific concerns raised by respondents, he also agreed that where appropriate the Secretary of State will consult with the CMA in relation to these undertakings and will publish the formal written advice given by the CMA. I am content to confirm this position," Wright said in a ministerial statement.

"The publication of the undertakings marks the final stage of the public interest consideration of this case. It is right that Ofcom, the CMA and my Department have taken such care in ensuring the bid is properly and effectively scrutinised. It is now a matter for the Sky shareholders to decide whether to accept Twenty-First Century Fox's bid," Wright added.

Sky now has 60 days to consider offers from would-be suitors before making a decision. The deal expected to be completed by October.

The battle for Sky is taking place against a larger fight between Walt Disney Co and Comcast to take over Fox's entertainment assets.

Fox has offered an array of concessions in its attempt to acquire Sky, namely offloading Sky News to Disney and guaranteeing the news channel's funding for 15 years, which was welcomed by the UK government last month. In addition, Comcast has also offered guaranteed funding for Sky News and other commitments, including maintaining Sky's headquarters in West London.

The divestment of Sky News to Disney was intended to satisfy UK competition watchdog Competition and Markets Authority, which ruled that Fox's acquisition of Sky would give too much control to the Fox-owning Murdoch family.

Sky, Fox and Disney signed a confidentiality agreement in March relating to a proposed acquisition of Fox by Disney.

Under UK takeover rules, if Disney were to acquire Fox's assets it would then be required to make an offer for Sky within 28 days unless Fox acquires Sky in its entirety or should any third party buy more than 50% of shares in Sky.

"There is the question of whether Disney and Comcast are paying over the odds for Sky, after all, no matter how many synergies and strategic benefits you can wring out of a takeover, it's hard to see how you can double the value of the acquired company," said Hargreaves Lansdown analyst Laith Khalaf.

Since December 2016, when Fox made its original approach, Sky's share price has more than doubled trading at around the 760p mark to 1,530p - adding around GBP13 billion to Sky's equity value in the process.

"Sky investors won't worry too much about that. There may or may not be a further chapter in this story, but either way there’s a pretty happy ending for Sky shareholders," Khalaf added.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

Copyright 2018 Alliance News Limited. All Rights Reserved.

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