US cable operator Comcast has made a formal £22bn bid for Sky, the owner of Sky News, in a move likely to stoke a bidding war for the company. Comcast followed through on interest it registered back in February with an offer of £12.50 per share on Wednesday morning.
The value of its bid put it ahead of the proposed deal Sky had with 21st Century Fox (21CF), which wants to clinch the 61% of Sky that it does not already own but is being held up by regulatory clearances. The current Fox offer puts an £18.5bn price tag on Sky. Comcast said its offer was 16% higher than Fox’s valuation.
After the new Comcast move, Sky said it was withdrawing its recommendation for the Fox bid.
“The Independent Committee of Sky welcomes today’s announcement by Comcast of its firm intention to make a £12.50 per share pre-conditional cash offer for Sky,”
“As a result of the announcement of this higher cash offer, the Independent Committee is withdrawing its recommendation of the offer announced by 21st Century Fox on 15 December 2016 and is now terminating the co-operation agreement entered into with 21st Century Fox on the same date.”
Fox responded to Comcast’s bid by saying it was considering its options and a further announcement would be made in due course.
Comcast said its bid came with a series of legally binding commitments on Sky ownership and UK investment.
It included a 10-year commitment to Sky News – its future proving one of the sticking points of the Fox bid which is still being considered by regulators over concerns it would hand the Murdoch Family Trust too much influence over UK media.
Comcast said it was in talks with Sky’s Independent Committee “with a view to obtaining a future recommendation of the acquisition”.
The US firm’s chairman and chief executive, Brian Roberts, said of the Sky bid:
“With its 23 million retail customers, leading positions in the UK, Italy, and Germany, and its history of strong financial performance, we see significant opportunities for growth by combining our businesses.”
“We also understand the role that Sky plays in UK society and in its customers’ lives and we are determined to be responsible and trusted owners of Sky.”
Its share price rose by over 4% following the announcement to £13.61 – significantly above the £12.50 per share offer by Comcast. It partly reflected expectations among investors that Fox and Comcast – along with potential other suitors – were likely to enter a bidding war.
“At this time, the independent committee notes that both offers are subject to pre-conditions and neither offer is currently capable of being put to shareholders.”
It said Sky would “co-operate fully” with both parties but also welcomed Comcast’s bid, saying it believed its voluntary commitments to the company under the offer “should comprehensively address any potential public interest concerns”.
That is because Comcast has a minimal UK media market presence.