Comcast Muscles Fox Aside With $39B Offer for Sky

Comcast Corp. swooped in with a knockout $39 billion bid for Sky Plc, putting the U.S. cable giant in line to acquire Europe’s largest satellite broadcaster after a months-long battle with 21st Century Fox Inc.

Comcast’s final offer of 17.28 pounds a share exceeded the top bid of 15.67 pounds from Fox, which was backed by Walt Disney Co., in an auction Saturday overseen by U.K. regulators. Comcast now needs Sky investors to tender their shares by an Oct. 11 deadline to seal its victory.

Winning Sky helps redeem Comcast Chief Executive Officer Brian Roberts’s deal-making prowess after he lost a separate bidding war for Fox’s entertainment assets to his rival, Disney CEO Bob Iger. Roberts is now set to turn his company into a global TV power, with Sky giving him the scale to better compete with the international video streaming giant Netflix Inc.

Fox is considering selling its 39 percent stake in Sky to Comcast if Disney supports the move, according to people familiar with the matter, who asked not to be identified as the deliberations are private.

Bloomberg Intelligence analyst Paul Sweeney said he expects Fox will tender. “I can’t imagine they want to be a minority shareholder in this,” Sweeney said. “It’s a very bold price.”

A representative for Fox declined to comment.

The sweetened bid from Comcast, 17 percent higher than the company’s offer for Sky going into the auction, exceeded expectations. It was well above the 16.53-pound average estimate of a Bloomberg survey of 17 M&A/event-driven desks, equity analysts and fund managers.

“I’m pretty excited. We’ve got a good price for it,” said Crispin Odey, founder of Odey Asset Management. The fund manager owns 0.6 percent of Sky shares, according to data compiled by Bloomberg. “I still think it may look a bit cheap in a couple of years.”

Sky’s independent directors said shareholders should accept the Comcast offer.

“This is a great day for Comcast,” Roberts said in a statement. “Sky is a wonderful company with a great platform, tremendous brand, and accomplished management team.”

Content and Distribution

Buying Sky allows Roberts to expand the content and distribution model he has embraced since buying NBCUniversal seven years ago. With Sky, the Philadelphia-based company would deliver TV services to 52 million customers in the U.S. as well as European countries including U.K., Italy and Germany.

Sky also brings Comcast sought-after TV content, including rights to Premier League English soccer. It has been boosting its investment in original TV productions such as 1920s sex-and-crime saga “Babylon Berlin” and “Britannia,” a period drama about the Roman conquest of Britain.

Netflix has relied on other companies’ broadband networks to distribute its lavish in-house productions and expand its global subscriber base to 130 million, and its rivals are still looking for an effective response.

Crucially for Comcast, Sky has a growing video-streaming business. Roberts has said he was “terribly impressed” with Sky’s market-leading Q box platform, which is also a rich source of data on customer viewing behavior. Comcast estimates that owning Sky will create $500 million in synergies, partly through selling Sky content in the U.S. and NBC programming in Europe.

Fourth Time Lucky?

Adding Sky would mean Comcast generates a fourth of its sales outside of the U.S., up from 9 percent now. It would also represent a victory in Comcast’s chequered history of dealmaking. While Comcast acquired NBCUniversal and DreamWorks Animation over the past decade, it failed in attempts to buy Disney in 2004, Time Warner Cable Inc. in 2015 and Fox in July.

If Fox had outbid Comcast, Sky would have fallen into Disney’s hands next year as part of its $71 billion Fox takeover deal struck in July.

That deal brought Disney franchises such as the “X-Men” and hit shows like “The Simpsons.” The loss of Sky partly stymies Iger’s goal of establishing more direct ties to consumers and expanding his international business.

Fox forced Roberts’ hand by raising its bid during the auction under Iger’s direction. That may have been an astute move by Iger, with Fox’s 39 percent stake in Sky now worth much more.

The payout for 87-year-old Murdoch’s Fox would amount to 11.6 billion pounds if it tenders to Comcast, some consolation for his second failed attempt to grab the rest of the U.K. broadcaster. The first was thwarted in 2011 by a phone-tapping scandal at his U.K. newspaper business.

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