The Murdoch family is facing the very real possibility of losing control of their 39% London-based Sky PLC European pay TV business – but don’t cry for them because it will give them billions in cash. That’s after Comcast, America’s biggest TV and cable company, lobbed a $US31 billion suggested offer for Sky, which is already under offer from Fox. The pressure though is on Fox and the Murdochs because the Sky share price had been rising in recent weeks, pressuring Rupert Murdoch and Fox to improve its takeover price.
Comcast shocked markets on Tuesday with its proposed all-cash offer, valuing Sky at £12.50 per share, a 16% above the £10.75 offer from Mr Murdoch’s 21st Century Fox. Fox said it would not change its offer because Comcast’s offer was only proposed at this stage. Shares in Sky soared 20.4% to close at £13.30 in London, well above Comcast’s offer price — an indication investors expect a bidding war which in turn sent Comcast’s New York-listed shares down nearly 6% in the US. But it is hard to see Fox and the Murdochs lifting their price when the existing offer has been blocked by UK regulators on media diversity (plurality) grounds and has no chance of being approved by the UK Government. Fox offered last week to guarantee the independence of Sky News for the next 10 years to win over regulators, but that offer was ignored.
What an ailing Rupert Murdoch (still recovering from a back injury in a boating accident on son Lachie’s tub over Christmas) makes of the Comcast approach remains to be seen, but with 39%, or $US12 billion of Comcast’s $US31 billion cash offer available to Fox and the Murdochs, it is hard to see them saying no, even though the final decision might be down to Disney which is buying Fox assets, including the 39% of Sky and possibly taking over the lingering bid from the Murdoch for the pay TV giant. Comcast’s bid reduces the cost of the Fox purchase for Disney which has offered $US66 billion in shares for the Fox assets, including debt.
Normally rival media companies don’t take on the powerful Murdoch empire or try and snatch away a key asset, even though the Murdochs are sellers (to Disney). It’s just not done to poke the mogul given he might get his tame newspapers and Fox News to bash the interloper. Just look at the way the BBC and ABC have been assaulted in the various Murdoch papers in recent years for daring to compete with their newspaper and TV outlets.
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But these are not normal times in the media with the rise of Netflix, Amazon, Apple, Facebook, Google/YouTube, Twitter etc sucking revenue and eyeballs from the established giants. These new rivals are huge companies – even the biggest media groups – the Murdochs 21st Century Fox, CBS, Viacom, even Disney, AT&T and Comcast are vastly smaller than Amazon, Apple, Facebook, Google/Alphabet and Microsoft. Disney, Comcast and the Murdochs have understood that with rival bids won by Disney to buy 21st Century Fox’s cable and film and TV assets production, but not Fox News Channel, the most profitable media business in the US. It is also why telco, AT&T is bidding for Time Warner (and being opposed by the Trump administration as Donald Trump and Rupert Murdoch are besties).
Unlike the Murdochs and Fox, Comcast has only a minimal presence in the British media market and there are none of the media plurality problems that saw UK regulators block the offer from Fox. Comcast said in its statement that it recognised that Sky News was an “invaluable part of the UK news landscape” and it intended to maintain Sky News’ existing brand and culture, as well as its strong track record for high-quality impartial news and adherence to broadcasting standards. Mr Roberts said Comcast plans to use Sky as a launch pad to expand its European presence. The company said the deal, if agreed, would boost its international revenues to 25% from 9%. Comcast says it well use London as its HQ and base to grow in Europe, which is music to the ears of the embattled May Government battling the negativity of Brexit.