Twenty-First Century Fox Inc. agreed to sell its 39-per-cent stake in the British broadcaster Sky PLC to Comcast Corp. on Wednesday in a deal worth US$15-billion, ending Rupert Murdoch’s years-long ambition to take full ownership of the satellite service he helped found three decades ago.
Mr. Murdoch, the executive co-chairman of Twenty-First Century Fox, sold most of his empire to the Walt Disney Co. this summer. The proceeds of the Sky sale will go to Disney, which plans to invest the money in its newest effort to sell its content directly to viewers via streaming services.
“We are proud of the role our company has played in building Sky, and of the outstanding value we have delivered for shareholders of [Twenty-First Century Fox] and Sky, and customers across Europe,” Fox said in a statement congratulating Comcast.
Comcast, led by Brian Roberts, beat out Murdoch in a one-day auction for Sky last weekend. The Philadelphia-based cable company bid £17.28 ($29.61) a share, while Fox – bidding on behalf of Disney – bid £15.67 ($26.85). Comcast’s offer puts the total value of Sky at approximately US$39-billion.
The decision to sell Fox’s stake in Sky rested largely with Bob Iger, the chief executive of Disney, who could have put pressure on Mr. Roberts had he refused to tender the shares. Comcast needs more than 50 per cent of Sky’s equity to complete its offer.
Disney had aggressively pursued Sky, with Mr. Iger calling the British company a “crown jewel” of the Murdoch empire and describing its direct relationship with tens of millions of customers in Europe as a way to speed the introduction of Disney-branded streaming services. Disney also wanted to keep Sky out of the hands of one of its biggest competitors.
With the sale of the Sky stake, along with the mandated divestitures of 22 regional sports networks owned by Fox, Disney will receive roughly US$30-billion to pay down debt involved with its US$71.3-billion purchase of Fox and invest in its subscription streaming efforts. Disney said on Wednesday that it would “expand” its streaming plans, which include the ESPN+ sports service and a Disney-branded competitor to Netflix Inc. that will roll out next year.
The rivalry between Mr. Roberts and Mr. Iger goes back years, but it came to a head in June when Comcast topped Disney’s initial offer for the bulk of Mr. Murdoch’s empire. That forced Mr. Iger to pay about US$18-billion more than he had planned in order to secure Fox’s assets. Then, on Saturday, Comcast emerged as the decisive victor in a battle with Disney for control of the British pay-television company Sky.
Disney’s agreement to sell its Sky stake raises the possibility that Comcast may be willing to make a separate deal involving the streaming service Hulu. Disney is poised to own about 60 per cent of that service after it closes the deal for Fox, but Comcast would remain a minority shareholder with 30 per cent. Hulu has more than 20 million subscribers and is a key part of Mr. Iger’s strategy to sell Disney’s shows and films directly to consumers. Disney intends to increase spending on content at Hulu and introduce the service overseas.
But British takeover laws forbid that any deal involving Hulu being contingent on a tit-for-tat manoeuvre involving Sky. So a transaction for Hulu would have to be made independently.
In Sky, Comcast gets one of Europe’s largest media companies, with nearly 23 million customers across five countries, including Britain, Germany and Italy. For British viewers used to living in a media universe long dominated by the Murdoch family, the potential Comcast takeover signals a notable shift in ownership.
The Murdochs have been fighting for control of Sky for the better part of a decade. Mr. Murdoch, 87, co-founded the satellite TV company in 1989 to compete with the British Broadcasting Corp. Sky, which has 31,000 employees and generated about US$17-billion in revenue last year, ranks as one of the most popular TV brands in Europe. It creates original shows, runs an influential news channel and has exclusive partnerships in Europe with HBO, CBS Corp.'s Showtime and Warner Bros. Entertainment Inc.
In the end, Disney was able to save some face. Comcast shares fell 6 per cent on Monday, the first day of trading after the Sky auction results were announced, as analysts criticized Comcast for what one called “grossly overpaying.” Disney shares rose 2 per cent.
“Rather than pay such a premium, Disney can now get paid that premium,” Todd Juenger, an analyst at Sanford C. Bernstein, wrote in a research report. “This weekend’s outcome of the bidding war for Sky was, in our view, the best possible result for Disney.”