Comcast is offering £22.1 billion ($30.9 billion) for a 61% stake in UK pay-TV giant Sky, potentially sabotaging a takeover attempt by 21st Century Fox, The Wall Street Journal reports. Comcast CEO Brian Roberts indicated he preferred to purchase 100% of Sky, but is prepared to settle for a majority stake.
For context, Fox already owns a 39% stake in Sky and offered to buy the remaining 61% for $16 billion in December 2016, but has faced roadblocks by UK regulators. Separately, Disney’s planned $52 billion acquisition of Fox’s assets includes Fox’s 39% stake in Sky. The proposed Disney-Fox deal was initially expected to ease regulators’ concerns over Fox acquiring a majority stake in Sky, but British regulators provisionally rejected the Sky-Fox deal anyway.
Sky is an attractive acquisition target for Comcast for several key reasons:
- It would enable Comcast to expand in Europe. Sky is a leading European entertainment provider with 23 million customers across seven countries including the UK, Italy, and Ireland. By acquiring Sky’s assets, Comcast would grow its international markets’ revenue to 25% of total revenue, up from 9% currently.
- It would grow the company’s OTT footprint. Sky’s Now TV service has around 2 million subscribers, while the broadcaster also has plans to launch streaming services in Switzerland and Spain. These digital services are attractive to Comcast, which lost 33,000 traditional pay-TV customers in Q4 2017. Although Sky is preparing for consumers’ broader shift to digital, western Europe is projected to gain nearly 7 million pay-TV subscribers from 2016 to 2022, per Digital TV Research.
- It would let Comcast diverge from government scrutiny associated with expanding its US cable business. Comcast is the largest US cable provider and faces regulatory constraints in further growing its domestic infrastructure business, according to Fortune. Expanding revenues through Sky represents a way for Comcast to grow while going around these potential US regulatory concerns.
Comcast’s offer for Sky is reflective of an increasingly consolidated media environment, where companies are joining forces to stay afloat as digital giants aggressively lure eyeballs away from linear TV. For example, Discovery announced it would acquire Scripps Network in August 2017 for $14.6 billion, in a deal that would allow the two companies to leverage their digital content library and collectively be home to nearly 7 billion monthly video streams. Video streaming services such as Netflix will pour more resources into original content in 2018, and this will continually lure viewers to OTT platforms as well as help spur M&A activity in the media sector.
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Source: FS – All – Entertainment – News
Here's why Sky is an attractive acquisition target for Comcast at billion