Sky welcomes Comcast, drops support for Fox

Comcast Corporation (CMCSA) formalized its $31 billion bid for Sky plc, thereby pushing ahead of 21^st Century Fox (FOXA) and setting off a bidding war. Comcast’s $17.45 per share offer exceeds Fox’s offer by around $4.2 billion in value. The company had put forth this offer earlier this year but decided to confirm it now.

After Comcast formalized its offer, Sky’s independent directors withdrew their support for Fox’s bid. The directors said they would now consider the offers submitted by both Comcast and Fox and the bids are yet to be submitted to shareholders.

Fox, which holds a 39% stake in Sky, said it remains committed to its offer and is considering its options. Fox has been struggling with UK regulators over the Sky deal as authorities believe the acquisition of Sky News by Fox would give the Murdoch family too much power over the British media. Fox offered many assurances to ease regulatory concerns and even proposed the sale of Sky News to Walt Disney Co. (DIS).

Comcast’s offer exceeds Fox’s offer by around $4.2 billion in value.

Fox’s proposed sale of its film and TV assets along with its holding in Sky to Disney has also added to the uncertainty of the situation. It now remains to be seen how far Fox and Disney will go to take Sky away from Comcast.

Expanding beyond the US will be beneficial to both Disney and Comcast. If Comcast succeeds in acquiring Sky, it will increase its investment capability in areas like programming. Comcast’s international sales would grow to 25% from the current 9%, besides bringing in significant annual cost savings and revenue benefits of nearly $500 million.

Comcast promised to invest in Sky News for 10 years and set up an independent board for the news organization. Comcast is also expected to face less regulatory hurdles in the UK compared to Fox and CEO Brian Roberts even said a regulatory review might not be needed. However, UK lawmakers believe Comcast’s bid should be treated equally as Fox’s offer and face the same legal procedures.

Sky’s shares rose in London and investors expect this bidding war to continue.