Now that Comcast has officially bowed out of the race for 21st Century Fox’s cable and studio assets, it is fully charged up in its bid to buy all of Sky.
Jefferies analyst John Janedis said that Comcast will benefit by being rid of any stock drag created by its bidding war with Disney for Fox.
“We believe the FOX/M&A overhang over leverage, valuation, and strategic direction should lift, and that full commitment to Sky should provide relief. The latest bid values Sky at £14.75 per share ($34B or £26B), with next steps likely including an auction style bidding process, with a decision finalized within the next 8 weeks. We continue to see accretion from the Sky deal, even with modest synergies, and at increased bids,” Janedis wrote in a research note.
Ian Whittaker, media equity researcher at Liberum, told CNBC that Comcast’s concession to Disney could be viewed as a “warning shot” that gives Disney some pause about battling Comcast for Sky.
“It essentially sends a warning shot to Disney over Sky. It essentially says, ‘We pulled out of the bid for the assets of the U.S., we therefore have more firepower available. If you come back with a revised bid, we can actually go higher as well,’” Whittaker said.
Comcast on Thursday called off its pursuit of Fox, clearing the way for Disney’s $71.3 billion deal for the company’s assets. Disney is buying Fox’s film production businesses, including Twentieth Century Fox, Fox Searchlight Pictures and Fox 2000 Pictures; Fox‘s television creative units Twentieth Century Fox Television, FX Productions and Fox21; FX Networks; National Geographic Partners; Fox Networks Group International; Star India; and Fox’s interests in Hulu, Sky plc and Tata Sky.
But Disney could find it difficult now to secure Sky as part of the deal. Earlier this month, Comcast fired back at Fox with a £14.75-per-share bid for 60% of Sky, a transaction with an implied value of $34 billion. That bid allowed Comcast to jump out ahead of Fox’s $32.5 billion, or £14 per share, and Comcast's new bid earned the recommendation of the Sky Independent Committee of Directors.
Now Comcast and Fox are working within a 60-day window for Sky. Within the first 46 days, Comcast and Fox can change the terms of their respective offers, and after that, five days of auctions with one bid per day will kick off. If Comcast wins, shareholders continue to tender their shares and if Fox wins, a shareholder vote occurs on day 60.