Poor old Rupert Murdoch. A media titan can’t even break up his own empire these days without gate-crashers turning up to spoil the show. Comcast’s £22bn bid for Sky is bold, aggressive and cutely-timed – qualities associated with Murdoch in his pomp – and, very probably, marks the start of a shoot-out for the UK satellite broadcaster.
The open question is who will to go head-to-head with Comcast. Should it be Murdoch’s 21st Century Fox, whose current £10.75-a-share cash offer for Sky has been trumped by 16% by Comcast? Or should Disney, in the process of trying to buy the bulk of Fox via a deal that includes the 39% stake in Sky, take matters in its own hands and make a direct counter-offer?
Therein lies the cleverness of Comcast’s timing. Brian Roberts, chairman and chief executive, has a decent chance of exploiting confusion in the opposition camps. Does Fox, given the importance of the Disney deal, have a completely free hand to raise debt and get into a bidding war for Sky? And does Disney, whatever it says about Sky being a “crown jewel”, really regard the UK TV company as fundamental to its wider purchase of Fox assets in the US?
The very worst outcome for Murdoch would be to lose to Comcast in the battle for Sky and then see his Disney deal scuppered by US regulators, which is still a possibility. In that case, as Jefferies analysts put it, Fox would be left as “a sub-scale collection of mainly US assets with India as the only material international exposure”.
Put another way, in that scenario, Murdoch would have been outmanoeuvred in the current frenzy of deal-making in the international media industry. It is why he is highly unlikely to shrug his shoulders and just accept Comcast’s cash for Fox’s current 39% stake in Sky. He will want to stay in this fight.
For Sky’s non-Murdoch shareholders, life is working out splendidly. Comcast, as a $184bn US cable giant, is plainly a serious bidder with little regulatory baggage. Critically, it would even be prepared to have majority control Sky with Fox or Disney as a co-traveller – it has set the threshold for acceptances at just 50.1%. In the stock market, Sky’s shares shot up to £13.30 on Tuesday morning, anticipating the bidding will go higher than Comcast’s £12.50 offer.
Wind the clock back and shares in Sky, amid worries about competition from Netflix, had slumped to 750p before Fox pounced in December 2016. The long, winding and still-unresolved UK regulatory process has not helped Murdoch’s cause, but he knew the risks. Events happen. Perceptions of Sky’s value have also been boosted by a successful renewal of Premier League rights at a lower price than last time.
Everything now points to almighty two or three-way scrap for Sky. This cannot be the ending Murdoch expected. He assumed Fox’s 39% stake in Sky meant he was the only possible bidder. He was wrong.