By Shalini Ramachandran, Amol Sharma and David Benoit
Comcast Corp. is taking on the Murdochs. The question is how far
it wants to go.
The cable giant on Wednesday lobbed an official $31 billion
proposal to buy European pay-TV operator Sky PLC, topping an
existing offer from 21st Century Fox Inc., which already owns a 39%
stake in Sky. Fox counts Rupert Murdoch and his family as major
shareholders.
The official Comcast offer sent Sky shares nearly 4% higher --
and above the Comcast bid, suggesting investors are positioning for
a bidding war. 21st Century Fox said it remains committed to buying
all of Sky.
Separately, Comcast is weighing whether to play interloper on
Fox's $52.4 billion deal to sell its entertainment assets to Walt
Disney Co., people familiar with the situation say. Comcast is
gaming out the possibility of making a public case to Fox's
shareholders that they should reject the Disney deal, which is
expected to come to a vote this summer, and opt for a Comcast
tie-up instead, people familiar with the situation said.
Comcast lost out to Disney in December when Fox rejected its
bid, which was 16% higher, according to a Fox regulatory filing
last week. Fox cited concerns about regulatory risk. The assets in
play include Fox's film and TV studio, cable networks and
international properties including Star India and the Sky
stake.
Comcast may choose to leave the Disney-Fox deal alone, and it
doesn't expect to make a decision in the near term, the people
familiar with the situation said.
Comcast's pursuit of potentially transformative deals comes as
the company posted strong first-quarter earnings growth buoyed by
its Winter Olympics and Super Bowl broadcasts, which offset its
fourth-straight quarter of cable TV subscriber losses. Its shares
rose 2.7% Wednesday.
A major consideration for Comcast to pursue any further deals is
its languishing stock price. As of Tuesday's close, Comcast shares
had declined 22% since late January, wiping out more than $40
billion in market value.
Comcast Chief Financial Officer Michael Cavanagh said on the
quarterly earnings call that the company was unlikely to use its
stock to make deals when the price is at these levels. He said the
company's strong balance sheet will give it flexibility to consider
opportunities "at times like this."
If Comcast chooses to go hostile for the Fox assets, Comcast
would need to woo Fox investors, which may not be easy. Comcast has
had conversations with several shareholders in the wake of its Sky
bid, including British investor TCI Fund Management, known for its
activism, people familiar with the situation said.
TCI has built a roughly $3 billion stake in Fox, with more than
4% of its shares, putting the firm among the company's top
shareholders, people familiar with the situation said. As of
December, TCI had held 0.7% of Fox's class A common shares,
according to FactSet. The next disclosure would likely come in a
May filing.
In recent weeks, TCI founder Chris Hohn spoke on the phone with
Comcast Chief Executive Brian Roberts and probed about Comcast's
interest in launching a public bid for Fox's assets, people
familiar with the situation said. Mr. Roberts didn't respond, the
people said. Other TCI officials have also had conversations with
Comcast's investor relations team that left Comcast executives with
the clear indication that TCI wants the cable giant to continue its
pursuit of Fox, the people said.
In an email this week, Mr. Hohn said he didn't urge Mr. Roberts
to go hostile in pursuit of Fox's assets.
Mr. Murdoch and his family have a 39% voting interest in Fox.
Their economic interest, which is what would count in a shareholder
vote on the Disney-Fox merger, is roughly 17%. (The Murdoch family
is also a major shareholder in Wall Street Journal-parent News
Corp)
Comcast is also watching closely the government's antitrust case
against AT&T Inc. and Time Warner Inc., which is playing out in
court. If AT&T wins, Comcast would feel more emboldened to make
a move, the people said.
Comcast is offering GBP12.50 ($17.47) a share for Sky, or 16%
more than Fox's GBP10.75-a-share bid. On the earnings, call,
Comcast executives assured investors that it would be a sound
investment, highlighting Sky's broadband service and original
programming arm to emphasize it is much more than a satellite TV
provider.
Mr. Roberts on Wednesday that Comcast loved its core businesses,
adding: "anybody who is viewing this as some diversion from that is
not reading us properly."
British regulators have held up Fox's takeover bid as they
examine whether it would give Mr. Murdoch and his family too much
influence in U.K. media. News Corp publishes three major British
newspapers.
Regulators are expected to deliver a final recommendation on
Fox's proposal on May 1, and then the British government will
decide whether to approve the merger outright, approve it with
conditions, or reject it.
For the quarter, Comcast's growth was powered by its
NBCUniversal media unit, where revenue rose 21% to $9.5 billion.
Comcast lost 96,000 cable TV customers, compared with a gain of
42,000 in the prior-year quarter.
Quarterly profit rose 21% to $3.1 billion, or 66 cents a share,
up from $2.6 billion, or 53 cents a share, a year ago.
--Ben Dummett contributed to this article.
Write to Shalini Ramachandran at shalini.ramachandran@wsj.com,
Amol Sharma at amol.sharma@wsj.com and David Benoit at
david.benoit@wsj.com
(END) Dow Jones Newswires
April 25, 2018 17:48 ET (21:48 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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