Comcast investors can breathe a sigh of relief as a potential acquisition of Sky News may have become a little less likely, according to analysts at New Street Research.
Fox, which already owns a chunk of the U.K. group and is trying to buy it outright, offered skittish British regulators two remedies this week: a 15-year funding guarantee if Fox is the winner or a sale to Walt Disney.
Disney’s bid for 21st Century Fox is being considered independently of a play for Sky News. Comcast has also thrown its hat in the ring for both assets.
But New Street Research thinks the latest twist makes it clear that Disney will fight for Sky, and that makes it more likely the Mouse will walk away with both Sky and Fox — an outcome that New Street said would please Comcast shareholders and boost the stock. The firm’s analysts noted that overhang from the potential deals has clobbered the giant cabler’s share price, which is down from $40 two months ago to about $34 currently.
“We doubt Disney would want Sky News as a standalone asset (loss making; marginal synergies); they are most likely offering to buy Sky News to help Fox get their acquisition of Sky approved. This in turn supports the view that Sky is important to Disney,” New Street said. “We think this supports the view that Disney is serious about acquiring Sky. Comcast is already in a disadvantaged position in competing against Fox for Sky; if Disney is determined to fight for the asset, it makes it less likely that Comcast will win. This increases the likelihood of the scenario that we think investors would like most: Comcast ends up with neither Fox nor Sky.”
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Comcast investors would prefer steady shareholder returns via growing buybacks versus an acquisition of Sky, the report said. It acknowledged that Comcast buying Sky and Fox might actually make the most strategic sense but, “it would be financially dilutive and result in significant pressure to the stock.”
Comcast walking away from both, “is undoubtedly the outcome that shareholders want most. It would re-focus the thesis for the stock on good business in a growing market,” the report concluded.