Comcast triumphs in £30bn Sky battle
US cable giant comes out on top after 24-hour auction goes to final round of blind bids, ending a seven-year pursuit
COMCAST last night emerged as the winner of an extraordinary battle for control of Sky after it defeated the combined forces of 21st Century Fox and Disney in a 24-hour auction.
The colossus of the US cable industry, which also owns the Hollywood studio Universal and the broadcaster NBC, made a blind bid of £17.28 per share for Sky, valuing the company at nearly £30bn.
Comcast came out comfortably ahead of Fox, which was effectively controlled in the auction by Disney. The Star Wars maker has agreed to buy most of Fox, including its 39pc stake in Sky, in a separate $71bn (£54bn) deal.
At the 5pm deadline Sky’s biggest shareholder made a final offer of £15.67 per share, less than the market value going into the auction. The highly unusual process to settle the takeover battle was overseen by the Takeover Panel, the City’s merger regulator.
Comcast’s offer won the immediate recommendation of Sky’s independent directors, led by deputy chairman Martin Gilbert, the joint chief executive of investment giant Standard Life Aberdeen. Sky chief executive Jeremy Darroch was also fielding bids from Comcast and Fox alongside a phalanx of bankers and lawyers.
It signals a major defeat for the Murdoch family in their lengthy pursuit of full control of Sky. Their first bid collapsed in 2011 as the phone-hacking scandal engulfed their newspapers.
This time Fox agreed to acquire the 61pc of Sky shares it did not already own in December 2016. The takeover was heavily delayed by regulatory scrutiny, however, which helped create the opportunity for Comcast to gatecrash the sale.
Rupert Murdoch had intended to sell the whole of
Sky on to Disney as part of a break-up of his international entertainment empire. Disney was last night still due to acquire Fox’s minority stake.
Sky shareholders will now vote on whether to accept Comcast’s bid. They have witnessed the battle for control of the company more than double its price. Hedge funds loaded up on Sky shares in preparation for yesterday’s final contest and are now sitting on hundreds of millions of pounds in paper profits. Fox’s own stake, which Disney could choose to cash in, is valued at nearly £12bn by Comcast’s bid.
The two sides sought ownership of Sky in an effort to bulk up to meet the challenge from tech giants.
The rise of relatively cheap subscription streaming services from Netflix, Amazon and others is threatening the traditional pay-tv business and means international scale and direct relationships with consumers are at a premium. Sky has subscription relationships with about 23 million households across Europe, as well as well-regarded technology and customer service operations.
Disney’s chairman Bob Iger, who is investing heavily in a global streaming service to deal direct with consumers, called Sky a “crown jewel” among Fox’s assets. His Comcast counterpart Brian Roberts said it was a “unique asset”.
The auction brings to an end a twoyear battle over the fate of Sky. It began when Fox seized on a slump in Sky’s share price caused by rocketing Premier League rights costs and the fall in sterling following the Brexit referen- dum to make a bid for the 61pc of the company it did not already own.
Sky’s independent directors accepted a £10.75-per-share offer that valued the company at £18.5bn, a premium of 40pc on the market price. The deal drew criticism from City investors who claimed the board had yielded too easily to the Murdoch approach.
Fox then faced a series of regulatory barriers as critics of the Murdoch family raised concerns about their sway over Britain’s media landscape.
Fox claimed that the proliferation of online news outlets and rise of Facebook, Google and Twitter as distributors, together with tabloids’ lower circulation, meant media plurality was not threatened.
However, a review of the Fox bid for Sky by Ofcom found the planned takeover raised concerns. The Government ordered an inquiry by the Competition and Markets Authority, particularly in relation to the impact full ownership by Fox might have on Sky News.
By the time regulatory scrutiny was concluded Murdoch had agreed to sell most of Fox to Disney. The news in November 2017 that the elderly mogul was prepared to break up the empire he built over decades led to an attempt by Mr Roberts to muscle in on the deal.
After being shut out in the US, Comcast turned its attention to Sky and in April outbid Fox with a £12.50-pershare offer that valued the company at £22bn. The scrutiny of Fox’s plans meant that without the Murdoch family’s political baggage, Comcast was able to win regulatory approval for its bid within months. Fox finally secured Government approval in July by agreeing to immediately hand control of Sky News to Disney and provide the lossmaking channel with a 15-year funding commitment.
Comcast won its approvals at the same time, however, setting up a straight fight over who would pay the most. An attempt by Mr Roberts over the summer to disrupt the larger deal between Fox and Disney failed, although he forced Mr Iger to pay about $20bn ($15bn) more than agreed.
On Sky the bidding increased to £14.75 per share, valuing the company at £26bn, but neither side blinked before a deadline on Friday, prompting the Takeover Panel to organise the biggest auction in British history.
It seems like an ignominious end. Sealed bids are usually the preserve of Britain’s horribly overinflated housing market, a sign that it is overheating once again. And yet the future of one of our most illustrious broadcasters will be decided precisely in the same manner that a one-bedroom flat in Clapton, East London, might be sold to an unsuspecting hipster.
American media giant Comcast and Rupert Murdoch’s 21st Century Fox went head to head in a dramatic blind auction that started on Friday night. The City has been enthralled. Such events are super-rare but after a near two-year bid battle, the contest will be decided in a weekend after the Takeover Panel, which policies mergers and acquisitions in the UK, ordered an unconventional solution.
But while it is great spectator sport, an auction like this is fraught with danger. Veterans of the Square Mile will recall that the last time the future of a blue-chip company of significant size was decided in this manner was Anglo-dutch steelmaker Corus in 2007. The winner of that fight still bears the scars today.
India’s Tata wildly overpaid after being drawn into a fierce bidding war with Brazil’s CSN. Having initially offered £4.1bn, Tata, in its desperation to break into the European market, ended up paying £6.2bn – a third more than its original bid.
The tussle was eventually settled during a quick-fire auction lasting seven hours with each side and its advisers gathered in separate locations, bidding via email.
The seller’s team waited in a third location, where they relieved the tension by playing pool and table football. After eight rounds, including a final round of sealed bids, Tata won.
It turned out to be one of the most disastrous deals of the pre-crisis deal boom. Tata lost its shirt and then some.
The problem with auctions of this nature is that they encourage over-exuberance. A bunch of trigger-happy executives surrounded by pumped up investment bankers in a bidding war with an arch rival is never going to foster restraint. Of course people will get carried away and lose their judgment, especially when you’re locked in a room for hours on end with billions of pounds at your disposal.
Not that Sky shareholders will care. They stand to make a killing once the drama has ended. The extraordinary saga started in December 2016 with a bid from 21st Century Fox that valued Sky at £10.75 a share or £18.5bn. The latest, from Comcast, is worth £14.75 or £26bn. However, prior to the auction the company’s shares were changing hands at £15.85 and hedge fund tycoon Crispin Odey thought the bidding could top £18 a share.
Sky boss Jeremy Darroch won’t lose any sleep. He stands to make a further £30m on top of £85m he’s been paid during a decade at the top.
Clearly, there is no prospect of Sky ending up on the corporate scrap-heap like Tata’s European steel interests nearly did. The broadcaster has a whopping 23m subscribers, superb technology and great content production, which makes it hugely valuable in a media industry that has been turned upside down by the advent of streaming.
Though Sky alone isn’t big enough to compete with the eye-watering budgets of Amazon and Netflix, owning it is the quickest way for the big American beasts to narrow the gap. The alternative is to spend years trying to build scale alone while the pair grow even stronger. Once the dust settles prepare for another bun fight.
‘A bunch of triggerhappy executives is never going to foster restraint’
Turbulence ahead for Ryanair
Ryanair boss Michael O’leary has spent the best part of three decades picking fights with rivals, regulators and even his own customers. Indeed such is his penchant for pugilism, one wonders if he’s ever gone full Ben Kingsley in Sexy Beast and started a fight with his own reflection.
Still, it has proved an effective approach. His apparent disregard for criticism created an air of invincibility that has enabled him to remain in charge for nearly 25 years and spearhead Ryanair’s dominance of Europe’s skies.
These days though, O’leary seems less formidable. Gone is the contempt for customers, replaced by a more cuddly image. And the company is reeling after a summer of discontent, during which cabin crew and pilot strikes grounded hundreds of flights.
Now, the City is starting to question how Ryanair is run. A third of investors have voted against the re-election of long-serving billionaire Chairman David Bonderman. Although the revolt wasn’t enough to force him to resign, several major shareholders have urged a corporate governance overhaul.
It could be a major flashpoint. O’leary is due to step down next year and has expressed uncertainty about a new term. Shareholders are right to express concerns but going public with them is a high-risk approach. Could discontent push him closer to the door before the board has the chance to put in place proper succession planning? O’leary will be hellishly hard to replace. Investors face a delicate balancing act.
We’ve heard it all now. Moss Bros has blamed its latest profit warning on World Cup fever. Here’s an alternative reason: the chain makes uninspiring, overpriced suits, and it has too many stores. Companies that are more honest about their problems face a much better chance of survival.
Rupert Murdoch’s 21st Century Fox assets include the Fox Entertainment Group – owner of the 20th Century Fox film studio responsible for new thriller The Predator
Unpopular: David Bonderman