Sky TV buyout talk as AGM looms
NBC Universal has kicked the tyres at Sky TV and may even have conducted due diligence, according to an industry source.
A wider deal is also said to be possible, whereby NBC Universal buys both Sky TV and MediaWorks, with TV3 filling the role currently held by Prime TV as Sky’s free-to-air channel. (Such a deal would run counter to another line of scuttlebutt, which sees a possible tie-up between MediaWorks and Stuff if the NineFairfax merger goes ahead across the table and Stuff is put on the block).
NBC Universal’s parent, Comcast, recently won a bidding war with Fox for Sky TV UK with a king-hit £30 billion bid on September 23.
Investors have yet to be convinced by the deal. Comcast shares fell 6 per cent on the day it was announced on September 24.
But the US media giant is said to be on the hunt for further deals, with Australia’s Seven Network also said to be in the frame.
Gossip-mongers have noted that NBC Universal’s Australia-New Zealand MD, Chris Taylor, was chief executive of Prime TV in the 2000s.
One source noted a circling buyer could be one reason Sky has been so slow to replace CEO John Fellet, who announced his intention to depart in March (he is staying on until a replacement is installed).
And after its stock market battering, which has seen its shares fall from $4.80 to a recent $2.13 as the Vodafone merger wobbled then fell apart under regulatory pressure, Sky’s market cap has crashed to just $829 million, making the stillprofitable firm a potentially attractive acquisition target.
However, with Sky and MediaWorks refusing comment, and NBC Universal offering no immediate response, it remains speculation. It is just another question for the NZXlisted company, along with who will succeed Fellet, and what is the company’s guidance for 2019.
Sky promises to answer the latter question, at least, at its AGM tomorrow.
On August 24, the broadcaster reported a $240.7m loss for the June year against a profit of $116.3m in the previous year. But allowing for a $360m non-cash accounting adjustment, Sky’s underlying net profit actually increased by 2.6 per cent to $119.3m as subscriber losses slowed and expenses were kept in check.
Regardless, shares ($2.57 on August 24) have continued to fall. Investors have reacted badly to Sky slashing its dividend, and the lack of guidance.
Forsyth Barr retained an “underperform” rating on Sky after its full-year earnings.
Despite Sky’s market cap more than halving, the brokerage says it is not a buying opportunity.
“Despite Sky’s significant stock price derating and prima facie attractive valuation multiples we warn investors to beware what we expect will likely prove a value trap,” analysts Matt Henry and Matt Dunn say in a recent note.
“We see no reason why the revolution to streaming and competition for audience will not continue to pressure Sky’s subscribers and ARPU [average revenue per subscriber].”
Henry and Dann expect Sky’s net profit to fall to $109.2m in 2019, and to $88m in 2021.
After last year’s halving, they expect the company’s dividend to stay at 15 cents per share over the next three years.
Sky shares were up 3.77 per cent to $2.20 in late trading, but yesterday’s gain still leaves the stock down 25.67 per cent for the year.