War and Peace seems positively succinct compared with the tale of Sky’s sale for £37bn. The business first received a bid — from News Corp — in 2010. Comcast clinched the purchase of the UK broadcaster this September. A full account of the machinations of magnates and ministers could fill volumes. For Sky investors, the takeaway is simple: all shall come to he or she who waits.
By the time the Murdoch family resumed its attempt to take full control of Sky in 2016, the broadcaster had fallen from favour on the London market. The slickly managed group was too small to prosper in an age of giants. Well-funded rivals, notably BT, were pushing up the price of sports rights. Pundits — Lex included — saw the 39 per cent stake already held by Rupert Murdoch’s 21st Century Fox as an obstacle to competing bids for Sky.
Comcast called that bluff. The US cable group was willing to contemplate controlling Sky with Disney, purchaser of Fox’s entertainment assets, as a minority investor. Comcast could not have integrated Sky and obtained the full benefits it sought. But nor could Disney have expected any dividends. Comcast was willing to pay £17.28 a share for Sky. That compared with Fox’s opening bid of £10.75.
Topped in a blind auction, Disney agreed to sell the Sky stake. The deal shows that fear loosens purse strings as readily as greed. Comcast’s business model is imperilled as customers ditch cable in favour of online video. Sky’s content and customers could help the group survive the shift. A resilient, well-run company will generally be worth something to someone, even if the market has de-rated it.
Lex files this deal under “good”. It certainly is for Sky investors, implying a hefty enterprise value of 15 times ebitda. However, that was also the multiple Disney agreed to pay in its $71bn acquisition of Fox entertainment businesses. Comcast’s debts will be steep but not unmanageable. The split of assets gives both US corporations greater scope to build online muscle.
Deal watchers relish the audacity of Comcast boss Brian Roberts. He raided the market for one-third of Sky, faced down the mighty Mouse and all for a transaction he jokes a London cabbie talked him into.
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