U.K. Clears Way for Bidding War Between Comcast and Disney Over Sky
Posted June 5, 2018 5:44 p.m. EDT
Updated June 5, 2018 5:48 p.m. EDT
LONDON — Comcast wants to upend the Walt Disney Co.'s empire-building plans, and a jewel of Europe’s media industry could give it an opening.
As both companies pursue a bigger-is-better strategy, they are vying for control of the British satellite broadcaster Sky. A regulatory ruling Tuesday could be a prelude to a bidding war over the company — and to a larger fight over 21st Century Fox.
The deal-making machinations, which have unfolded in two countries for over a year, are complicated and interconnected. Disney has offered to buy Fox, which already owns part of Sky and has offered to buy the rest. Comcast has made plays for both Fox and Sky, all with the goal of causing trouble for Disney.
Fox’s bid for Sky had been held up in regulatory limbo in Britain for months over concerns that it would give Fox’s chairman, Rupert Murdoch, too much control over the country’s media. On Tuesday, Britain’s culture secretary, Matthew Hancock, ruled that Fox could proceed with its bid, provided that it sold Sky News, the broadcaster’s 24-hour news channel.
In December 2016, Fox offered 18.5 billion pounds ($25 billion), for the piece of Sky it did not already own. Comcast countered in April with a $29 billion bid. Given the ruling Tuesday, Comcast is expected to continue its quest to buy Sky, forcing Murdoch and Disney to pay up if they want to win.
The complexity of the maneuvering underscores the shifting state of the media business. As consumers do more of their viewing online, Amazon, Netflix and other streaming services are shaking up the industry. And as the traditional players try to compete, they have decided on a collective response: making deals.
In December, Disney agreed to buy most of Fox, including its Sky stake, the movie studio 20th Century Fox and the Indian broadcaster Star. Comcast is expected to decide within weeks whether it will challenge that deal directly
Hovering over Comcast’s deliberations is an antitrust ruling in another media-related deal: AT&T’s $85.4 billion offer for Time Warner. Fox cut off earlier talks with Comcast over antitrust concerns. A favorable ruling for AT&T could give Comcast a way back in.
Sky would play an important role in the future of either Disney and Comcast. Based in London, the broadcaster and internet service provider has 23 million customers in five countries, and it owns valuable broadcasting rights to English Premier League games, Formula One races and other sporting events. It also produces its own entertainment programs and has a streaming service, Now TV.
The combination makes Sky the kind of one-stop shop that Comcast and Disney want to be. Robert A. Iger, Disney’s chief executive, has called the satellite broadcaster a “crown jewel.” Comcast views it as a steppingstone in its own plans to expand beyond the United States. Murdoch has long coveted regaining control of Sky, which he founded in 1989. He tried once before to buy out other investors in the company, in 2010, but was forced to withdraw amid a furor over a phone-hacking scandal involving his British tabloid empire.
When Fox made its bid for Sky in 2016, regulators were again wary. Murdoch and his family are divisive figures in Britain, controlling not only Sky but also News Corp., which runs some of the country’s most popular newspapers. Lawmakers and regulators have openly questioned whether the Murdochs should have so much sway over British news outlets.
Fox has sought to assuage those concerns, promising to maintain the editorial independence of Sky’s news arm. Ultimately, Hancock, the culture secretary, insisted that Sky News be sold to protect its integrity. He told Parliament on Tuesday that the news operation could be sold to Disney, as Fox has proposed, or to another buyer, as long as it remained financially viable.
But Hancock said that if Fox could not reach a deal for Sky News that the government would approve, he would be forced to block its bid, adding, “This is not my preferred approach.”
Fox, which has waited 16 months for government clearance for its bid, said it welcomed Hancock’s decision. The company added, “We are confident that we will reach a final decision clearing our transaction.”
What is most likely to come next are internal deliberations within Fox and Disney about how much to raise their offer for Sky. Shares in the British broadcaster have jumped 22 percent since February, when Comcast announced its plans to challenge Fox’s bid.
Sky, which withdrew its support for Fox’s bid once Comcast made a formal takeover offer, said in its own statement on Tuesday that its independent directors would focus on what would fetch the most value for shareholders.