Comcast targets Sky for acquisition

Having been rebuffed in its most recent effort to expand via acquisition in the U.S., Comcast Corp. (NASDAQ:CMCSA) has decided to try its luck in Europe. The company revealed that it has published a Rule 2.4 announcement (under the City Code On Takeovers And Mergers) that describes a cash takeover offer for UK-based Sky in competition with 21st Century Fox. Comcast says it is prepared to offer £12.50 per share for the European news and entertainment company, which it says is 16% better than Fox's £10.75 per-share bid for the 61% of Sky it doesn't already own. The bid, which is not yet official, values Sky at £22 billion ($31 billion).

"We think Sky is an outstanding company. It has 23 million customers and leading positions in the UK, Italy, and Germany," said Brian L. Roberts, chairman and CEO of Comcast. "Comcast intends to use Sky as a platform for growth in Europe. We already have a strong presence in London through our NBCUniversal international operations, and we intend to maintain Sky's UK headquarters. Adding Sky to the Comcast family of businesses will increase our international revenues from 9% to 25% of company revenues."

The deal, if consummated, would prove to be accretive to free cash flow per share in the first year after closing, Comcast expects.

Comcast's most recent foray into major M&A, a proposed deal to acquire Time Warner Cable, ran aground in 2015 due to regulatory concerns (see "All eyes on Charter in wake of Comcast/Time Warner Cable merger failure"). The fact that AT&T's bid to acquire Time Warner is headed to court (see "AT&T, DoJ headed to court over Time Warner acquisition") also may have prompted Comcast to look overseas for expansion opportunities.

Complicating the bidding for Sky is that Disney offered $52.4 billion this past December to buy a major piece of Fox's film and TV businesses, with Sky expected to be a portion of the assets transferred. How that potential deal would be affected if Fox failed to purchase Sky is unclear. In addition to the pressure from Comcast, Fox's bid has run into regulatory hurdles in the UK concerning whether full Fox ownership of Sky would give Rupert Murdoch and family too much control over UK media.

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