Sky shares surge after Comcast wins auction with lofty bid

Shares in Sky jumped 9 percent on Monday to within touching distance of the 17.28 pounds a share Comcast bid to beat Twenty-First Century Fox in the battle for Europe’s biggest pay-TV group.

The US cable-TV giant offered $40 billion in a rare weekend auction that brought to an end its battle against Rupert Murdoch’s Fox and Walt Disney, which would have been Sky’s ultimate owner if Murdoch had succeeded.

Both Comcast and Fox/Disney wanted Sky to increase their reach in Europe, where pay-TV is growing, and to gain access to Sky’s 23 million customers which would bolster their defense against streaming services from Netflix and Amazon.

The prize was valued far higher by Comcast in the third and final round of the auction — Fox offered only 15.67 pounds — and its bid quickly received the backing of Sky’s independent directors. The Fox bid was below the level at which Sky shares were trading on Friday.

Comcast, which owns the NBC network and Universal Pictures, is paying a high price — more than double Sky’s share price before Fox made its initial approach in December 2016.

The big hurdle to Comcast’s ambitions is the 39 percent of Sky that Fox owns, and which it has agreed to sell to Disney in a separate wider $71 billion deal.

Fox’s holding, which Comcast’s offer values at more than $15 billion, stems from Murdoch’s role in the creation of the company as a pioneer in British pay television nearly three decades ago.

Fox/Disney have not said whether they will accept Comcast’s offer. Without that holding, Comcast will need about 82 percent of the remaining shares for its bid to cross the threshold for acceptances.

Analysts at Royal Bank of Canada said if Fox/Disney do not tender their shares Comcast would be unable to de-list Sky or squeeze them out.

“This could be used as leverage by Disney in return for distribution rights, or as part of any future asset swap,” they said on Monday.

Sky operates in European markets such as Britain, Ireland, Germany and Italy. The deal also gives Comcast an immediate beachhead in online video streaming with its Now TV business, which has about 2 million customers.

Analysts see Comcast super-charging Now TV to combat Netflix across the globe. And Sky’s relationships to distribute HBO entertainment content and Premier League soccer further insulate Comcast over the next few years.

The deal with Disney will leave Fox to focus on assets such as Fox News Channel and its broadcast of sports such as National Football League and Major League Baseball.

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