Outfoxed Comcast looks to the Sky

US telco conglomerate Comcast has decided it can’t be bothered with 21st Century Fox but is still really keen on Sky.

Apparently determined to complicate things for media rival Disney at every possible opportunity, Comcast seems to have decided that forcing Disney to come up with an extra $19 billion to get hold  of Fox is enough for now. The real fun will now consist of making sure Disney doesn’t get hold of Sky when the Fox deal goes through.

Disney bid $52.4 billion for Fox at the end of last year, but Comcast decided to throw a spanner in the works by offering $55 billion for it in June. This forced Disney to come back with a $71.3 billion offer soon after, which turned out to be enough to make Comcast throw in its cards. “Comcast does not intend to pursue further the acquisition of the Twenty-First Century Fox assets and, instead, will focus on our recommended offer for Sky,” said the Comcast announcement.

This seemed to be the likely outcome when Comcast quickly escalated the bidding war for Sky last week. An intriguing aspect of this bid is that, if it succeeds, Comcast and Disney will have to coexist in the running of Sky, since Fox already owns 40% of it. It’s hard to see how they could sustain that bizarre symbiosis, so something will have to give. On the other hand Disney could just decide to hold on for a bit just to annoy Comcast.

Digital TV Europe did a good analysis of the various plot twists back when the Comcast bid for Fox was just a rumour, which you can read here.

Sky shareholders rejoice as Comcast immediately tops Fox offer

The bidding war for Sky is really hotting up with Comcast barely pausing for thought before trumping Fox’s latest acquisition offer.

Sky’s share price has pretty much doubled since 21st Century Fox first made a bid to acquire the rest of it back in December 2016. Sky shareholders’ wildest dreams were realised when Comcast eventually decided it wanted some of that action and it clearly means business.

Usually there’s a respectful silence in between competing mega-M&A bids but Comcast clearly has some kind of bidding ceiling in mind and hasn’t hit it yet, so why beat around the bush? A further hastening factor is the imminent announcement from some UK cabinet minister or other is going to make a pronouncement on the acceptability of Fox’s advances.

On the flip side the bidding increments seem to be shrinking. Comcast’s latest bid is £14.75 per share (£26 billion) – a mere 75p more than Fox’s last one, which it presumably hoped would be too rich for Comcast’s blood. If we assume, for the sake of argument, that Comcast’s ceiling is £16 per share, then it will be interesting to see if Disney-supported Fox chooses to make a more aggressive counter-bid.

“Yesterday’s offer from 21st Century Fox left the door widely open, but it’s slowly closing now,” said Analyst Paolo Pescatore. “The ball is now firmly in Murdoch’s and Disney’s court. I am expecting another round of bids and that will probably be it.”

Fox strikes back at Comcast in Sky bidding war

21st Century Fox has put in an increased offer to buy those bits of Sky it doesn’t already own, beating an earlier counter-offer from Comcast.

Fox bid £10.75 per share for Sky back at the end of 2016, but the bid was stalled by UK regulators taking a closer look at it to see what effect it would have on media plurality in the UK. They eventually concluded the potential acquisition could go ahead so long as Sky news is sold, to ensure its independence.

By that time, however, US cable and media giant Comcast had taken an interest and in April of this year counter-bid to the tune of £12.50 per share. After mulling this over for a few weeks Fox has decided Sky is worth fighting for and has raised its own bid to £14 per share – valuing Sky at around £24.5 billion.

“As the founding shareholder of Sky, we have remained deeply committed to bringing these two organizations together to create a world-class business positioned to deliver the very best entertainment experiences well into the future,” said a Fox statement. “We strongly believe that a combined 21CF and Sky will be a powerful driver for the continued growth and vibrancy of the UK and broader global creative industries.

“The enhanced scale and capabilities of the combination will enrich Sky’s ability to continue on its mission for years to come, especially at a time of dynamic change in our industry. This transformative transaction will position Sky so that it can continue to compete within an environment that now includes some of the largest companies in the world, but none of whom have demonstrated the same local depth of investment and commitment to the UK and to Europe.

“We said when we announced our proposed acquisition of Sky that we were firmly committed to UK’s creative industries and the contribution they make to the UK economy. We remain committed to the UK and believe that our offer for Sky will bring the best value for all the company’s stakeholders and are delighted that the Independent Board of Sky has recommended our offer to its shareholders.”

Apparently some UK politician still need to give such a deal their seal of approval, something that is expected to happen later this week. Fox is itself in the process of being acquired by Disney and maybe the imminent arrival of a wealthy parent that competes directly with Comcast probably contributes to its willingness to persist with a bidding war.

AT&T wastes no time in completing Time Warner acquisition

A mere two days after a judge rejected the US government’s attempt to block it, AT&T has completed its $85.4 billion acquisition of Time Warner.

The giant US telco is now the owner of some of the biggest properties and brands in the media world. HBO is arguably the number one producer of premium video content, responsible for Game of Thrones and Westworld as well as all-time classics The Wire and The Sopranos. Turner owns a bunch of major broadcast TV channels including CNN and Cartoon Network, while Warner Brothers is one of the big movie studios.

“The content and creative talent at Warner Bros., HBO and Turner are first-rate,” said AT&T CEO Randall Stephenson. “Combine all that with AT&T’s strengths in direct-to-consumer distribution, and we offer customers a differentiated, high-quality, mobile-first entertainment experience. We’re going to bring a fresh approach to how the media and entertainment industry works for consumers, content creators, distributors and advertisers.”

The strapline for the press release announcing the completion of the deal announces: “Positioned to be a Global Leader as a Modern Media Company. Set to Create the Best Entertainment and Communications Experiences in the World.” This chimes with the contemporary trend towards mutliplay and sets AT&T up as the big beast of this space.

The Time Warner name, which can be traced back to the launch of Time magazine in 1923, will now cease to exist. AT&T is adding a new super-silo to its corporate structure to accommodate these new media assets, alongside its communications, international and advertising business, but has yet to pick a name for it. You would presumably get short odds on ‘AT&T Media’.

That silo will be led by AT&T lifer John Stankey, who took over the AT&T Entertainment Group that was created to house DirecTV when it was snapped up for $50 billion or so in 2015. He’s going to get a crash course in running a media empire from former Time Warner CEO Jeff Bewkes during a transition period of unspecified length.

“Jeff is an outstanding leader and one of the most accomplished CEOs around,” said Stephenson. He and his team have built a global leader in media and entertainment and I greatly appreciate his continued counsel.”

There are only two larger media companies out there: Comcast and Disney, who are currently in a bidding war for Twenty-First Century Fox, with the former outbidding the latter to the tune of 19% earlier this week by offering $65 billion, apparently hastened by the AT&T development. Fox, meanwhile has trying to buy Sky for ages, a process also complicated by Comcast’s gazumping tendencies.

The US seems to be feeling pretty laissez faire about massive comms/media consolidation but Europe might yet have something to say about all this. The Fox/Sky acquisition has been mainly held up by concerns about media plurality in terms of TV news and the more of this sort of M&A happens the more questions like these will be asked.

UK Government confirms Fox can bid for Sky as long as it flogs Sky News

A protracted assessment of Twenty-First Century Fox’s desire to acquire the 60% of Sky it doesn’t already own has concluded something needs to be done about Sky News.

The concern is that giving Rupert Murdoch-owned Fox control of Sky would negatively affect media plurality in the UK because he already owns a bunch of newspapers. So the Secretary of State for Digital, Culture, Media and Sport, Matt Hancock, has concluded the acquisition process can only proceed if Fox finds an alternative, independent home for Sky News.

“I agree with the CMA that divesting Sky News to Disney, as proposed by Fox, or to an alternative suitable buyer, with an agreement to ensure it is funded for at least ten years, is likely to be the most proportionate and effective remedy for the public interest concerns that have been identified,” said Hancock.

“The CMA report sets out some draft terms for such a divestment, and Fox has written to me to offer undertakings on effectively the same terms. The proposals include significant commitments from Fox. But there are some important issues on the draft undertakings which still need to be addressed.

“I need to be confident that the final undertakings ensure that Sky News:

  • remains financially viable over the long-term
  • is able to operate as a major UK-based news provider
  • and is able to take its editorial decisions independently, free from any potential outside influence

“As a result, I have asked my officials to begin immediate discussions with the parties to finalise the details with a view to agreeing an acceptable form of the remedy, so we can all be confident Sky News can be divested in a way that works for the long term.”

There is, of course, another major potential spanner in the works for Fox and that’s the arrival of US broadcast giant Comcast on the scene with a higher bid a month or so ago. Hancock hasn’t got any issues with Comcast so Fox will need to not only deal with Sky News but outbid Comcast if it’s going to achieve its UK ambitions. All of this is good news for Sky shareholders.

“Sky welcomes today’s announcements by the Secretary of State regarding the proposed offers for Sky by 21CF and Comcast,” said a Sky corporate announcement. “In respect of 21CF’s proposed acquisition of Sky, Sky notes that the Secretary of State considers that the undertakings provided by 21CF have provided a good starting point to overcome the adverse public interest effects of the proposed merger that he has identified, and that DCMS Officials have now been instructed to seek to agree final undertakings with 21CF.

“The Secretary of State has stated that, dependent on the outcome of these discussions, he would hope to be in a position to consult on any agreed final undertakings within the next two weeks. Sky also notes the Secretary of State’s final decision not to intervene on public interest grounds in relation to the Comcast offer for Sky.”

All of this is good news for Sky shareholders. It’s hard to imagine Fox throwing in the towel now, after all the hassle it has taken to get to this point, and it’s equally hard to imagine Comcast bailing out after just one counter-offer. Having said that today’s decision seems to have been priced in, with Sky’s share price not having moved much since Comcast first indicated its interest at the end of February.

Comcast gazumps Murdoch/Disney with £22 billion bid for Sky

Giant US telco Comcast has upstaged Rupert Murdoch by offering £12.50 per share – around £22 billion – for Sky.

Murdoch’s 21st Century Fox bid £10.75 per share for Sky back in 2016 but the process has been bogged down by UK regulatory concerns that have called into question the prospect of it ever succeeding. Comcast seems to have taken advantage of this lull to swoop for the pay TV company and it wouldn’t be surprising to see Murdoch throw in the towel at this stage.

“We are delighted to be formalizing our offer for Sky today,” said Brian Roberts, Chairman and CEO of Comcast Corporation. “We have long believed Sky is an outstanding company and a great fit with Comcast. Sky has a strong business, excellent customer loyalty, and a valued brand. It is led by a terrific management team who we look forward to working with to build and grow this business.

“With its 23 million retail customers, leading positions in the UK, Italy, and Germany, and its history of strong financial performance, we see significant opportunities for growth by combining our businesses. Sky is a highly complementary business and will expand Comcast’s international footprint in the UK and Continental Europe.

“Sky will be our platform for growth across Europe. The combined customer base of approximately 52 million will allow us to invest more in original and acquired programming and more in innovation as we strive to deliver a truly differentiated customer experience. We look forward to receiving the necessary regulatory approvals.”

This is yet another example of a US telco looking to spend big on the content side of things. Comcast had already bought NBC Universal back in 2011 and now it clearly fancies expanding its operations internationally. Sky is arguably the most equivalent company to Comcast outside of the US.

The independent committee of Sky welcomes today’s announcement by Comcast of its firm intention to make a £12.50 per share pre-conditional cash offer for Sky, which follows its initial possible offer announcement on 27 February,” said the Sky announcement.

“The independent committee also welcomes the post-offer undertakings and commitments Comcast intends to give in relation to Sky’s existing business including Sky News, and believes that these voluntary commitments should comprehensively address any potential public interest concerns. In addition to Comcast and as required by the Takeover Panel, Sky also intends to give the same post-offer undertakings conditional upon the Comcast Offer becoming wholly unconditional.

“As a result of the announcement of this higher cash offer, the independent committee is withdrawing its recommendation of the offer announced by 21CF on 15 December 2016 and is now terminating the co-operation agreement entered into with 21CF on the same date.”

Since Fox has already accepted an acquisition bid from Disney, Comcast is effectively bidding against Disney on this one and may consider this to be an opportune time, while there is still uncertainty around the deal’s completion. Comcast has also gone to the trouble of publishing a presentation to show into news and journalism it is, presumably in anticipation of concerns about Sky News being closed down. Here it is.

Comcast journalism investments 1

Comcast journalism investments 2

CMA blocks Murdoch’s Sky high ambitions

The Competition and Markets Authority (CMA) has blocked Rubert Murdoch’s and Fox’s $11.6 billion attempt to full control of Sky on the grounds of media plurality.

In short, the CMA doesn’t want any one individual or organization controlling too many press outlets in the UK. It would not be in the public interest, according to the watchdog, due to the importance of diversity of publicly consumed information to the democratic process. Murdoch’s assets are already read, heard or watched by a third of the UK population, which is already a questionable amount in our own opinion.

“The CMA has provisionally found that if the deal went ahead, as currently proposed, it is likely to operate against the public interest,” the CMA said in a statement.

“It would lead to the Murdoch Family Trust (MFT), which controls Fox and News Corporation (News Corp), increasing its control over Sky, so that it would have too much control over news providers in the UK across all media platforms (TV, Radio, Online and Newspapers), and therefore too much influence over public opinion and the political agenda.”

This will certainly come as a blow to Murdoch and the Fox business, as this is a deal which has been in the making since December 2016. It was referred to the CMA in September by the Department of Digital, Culture, Media and Sport, over the concerns of media plurality, and this has been realised today. It is a clear message; no one individual or group should be able to influence public opinion to that extent.

Of course, there was a lot of hedging in the statements. The CMA praised Sky, Fox and Murdoch on its ability to inform the general public on the important issues of today, but irrelevant of precedent the CMA has to be on the lookout for nefarious intentions. Should one individual has such control over this many popular outlets, there is a risk of some stories being over hyped and some down played. Fake news might be a problem on social media, but it would be nothing if this many mainstream media titles started playing the same tune of euphoria and distraction.

This is not the end of the road however, as the CMA has put out a couple of suggested remedies to maintain media plurality, the first of which is simply banning the transaction and maintaining the status quo. The problem here is that should the CMA prevent the deal, there is a risk Sky News could be shut down. CMA has banned the closure of Sky News during the investigation, but there is a possibility of it happening. This is not a realistic solution, so we’re not too sure why the CMA is considering it.

Another possibility could be spinning off Sky News as its own standalone business. This might prove to be an interesting option for Murdoch considering the threat of extinction has been used as a bargaining chip to force through the deal. Why threaten the destruction on an asset when money can be made selling it off, achieving the desired result.

The final area is the deal with Walt Disney Company. During December, The Walt Disney Company announced that it was to acquire 21st Century Fox, after the spin-off of certain businesses, for $52.4 billion in stock. According to the CMA, this deal would weaken Murdoch’s hold over Sky, the root concern for media plurality, and therefore put the Fox/Sky deal back on the table. The door is not closed on this deal, but the CMA is not letting Murdoch do things his own way. One person having that much control over the media in one country is not a situation which should be allowed.

The Disney/Fox deal is of course subject to its own criticism and scrutiny from market watchdogs, so there might be a few nervous executives. A deal of this size usually hits hurdles in one or two markets around the world, so pinning the hopes of a controversial acquisition, on the success of another is certainly not an idea situation.

Disney hounds Murdoch into selling Fox for $66 billion

Media mogul Rupert Murdoch has decided the entertainment business is too much like hard work and has flogged most of 21st Century Fox to Disney.

Disney will shell out $52.4 billion for the acquisition and also take on $13.7 billion of its debt. In return it gets Fox’s movie and TV operations, except for the Fox broadcast network, which it’s not allowed on competition grounds because it already owns the ABC network. Among the highlights for Disney is the acquisition of some of the few major Marvel properties they don’t already own: X-Men, Fantastic Four and Deadpool.

“The acquisition of this stellar collection of businesses from 21st Century Fox reflects the increasing consumer demand for a rich diversity of entertainment experiences that are more compelling, accessible and convenient than ever before,” said Bob Iger, CEO of Disney.

“We’re honored and grateful that Rupert Murdoch has entrusted us with the future of businesses he spent a lifetime building, and we’re excited about this extraordinary opportunity to significantly increase our portfolio of well-loved franchises and branded content to greatly enhance our growing direct-to-consumer offerings. The deal will also substantially expand our international reach, allowing us to offer world-class storytelling and innovative distribution platforms to more consumers in key markets around the world.”

“We are extremely proud of all that we have built at 21st Century Fox, and I firmly believe that this combination with Disney will unlock even more value for shareholders as the new Disney continues to set the pace in what is an exciting and dynamic industry,” said Murdoch. “Furthermore, I’m convinced that this combination, under Bob Iger’s leadership, will be one of the greatest companies in the world. I’m grateful and encouraged that Bob has agreed to stay on, and is committed to succeeding with a combined team that is second to none.”

Here they both are, shaking on the deal in London. Don’t they look pleased?

Happy Iger and Murdoch

The announcement went on at great length about what a great idea this is for all concerned, but that sentiment may not be shared by anyone who currently works at Fox. One of the reasons this is such a great deal, we’re told, is that ‘the acquisition is expected to yield at least $2 billion in cost savings from efficiencies realized through the combination of businesses.’ That’s a lot of redundancies and, according to TBI Vision, there is already considerable disquiet.

M&A of this size is usually about economies of scale, efficiencies, etc and with the entire media world threatened by the likes of Google, Facebook and Amazon, it’s not at all surprising to see considerable consolidation among the incumbents.

Paolo Pescatore, Analyst at CCS Insight, seems to concur. “This deal is all about Disney taking greater control of its destiny throughout the entire value chain, from content production to distribution,” he said. “Even a giant like Disney has not been immune to changing behavioural patterns as consumers have embraced new ways of watching TV shows and movies.

“The move will firmly establish Disney as one of the leading media companies in the world and puts it in a great position to compete head on with the threat posed by the Web providers such as Amazon and Facebook. Further disruption lies ahead and we believe that this acquisition will force others to react.”

All this media M&A has increasing relevance to the telecoms sector, especially in the US where we’ve seen Comcast and Verizon spend big on media and AT&T hoping to trump the lot of them by acquiring Time Warner. The consolidation will probably continue but acquisition opportunities are running low. Surely someone has to buy Netflix one of these days.