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Comcast (NASDAQ: CMCSA) appeared as successful bidder of the European Pay TV Operator Sky PLC (NASDAQOTH: SKYAY) Last weekend. Its final offer of £ 17.28 per share was approximately 10% higher than the last offer of Twenty-first century Fox (NASDAQ: FOXA).
Fox owned about 39% of Sky before making an offer of £ 10.75 per share in December 2016. It was already a 36% bonus on Sky's stock price at the time. time. Comcast's winning bid was 61% higher than Fox's initial bid, and more than double the trading value of the shares before the start of the takeover bids, there are approximately 23 months.
Many investors believe that Comcast is overpaid for Sky. In addition to that, he will pay about $ 15 billion to Fox for his 39% stake in European society. Disney (NYSE: DIS), who is acquiring Fox, has also accepted the sale. This money will go directly against Comcast and go directly to the consumer. Plus, Comcast is put in a position where it could offer another boost to Disney's ambitions.
Source of the image: Sky.
A big check to write
The Comcast offer values Sky at nearly $ 40 billion. At last check, Comcast does not have this type of money on its balance sheet. This means that Comcast will add a significant amount to its $ 64 billion debt in order to pay for the acquisition. This means that the ultimate cost of the acquisition could be much higher than the selling price when taking into account the interest and the potential pressure on cash flows resulting from increased indebtedness.
Comcast taking control of Sky, Fox and Disney can no longer benefit from their participation in European society. It makes sense that Fox sells his stake, and if he can get a massive bonus for stocks, that's good.
Interestingly, Comcast is considering a similar situation as a minority shareholder of Hulu. Comcast owns 30% of the streaming service and Disney will own 60% when it closes its Fox acquisition. Comcast would consider selling its 30%, since Disney will virtually run the company now with its majority stake. Comcast could use these funds to finance its acquisition of Sky.
The most likely buyer of Comcast's interest in Hulu is Disney. Giving Hulu even greater control over Hulu would only accelerate its ambitions for direct consumption. BTIG analyst Rich Greenfield says the sale of its stake in Hulu to Disney puts Comcast in jeopardy of losing its NBCUniversal license revenue, giving it greater control over the company's strategy at Disney.
$ 15 billion in Disney's pockets
As Disney prepares to acquire Fox, selling Fox's stake in Sky gives it essentially $ 15 billion more to use. Disney is also seeking a bidder for Fox's regional sports networks, which the Department of Justice is required to divest as part of its approval of the merger.
Disney plans to invest additional cash in its direct selling platforms. In a press release announcing the sale of his Sky shares by Fox, Disney said:
"Disney will expand its significant investment in the Disney brand direct-to-consumer offering launched in late 2019 and the new ESPN + sports streaming service, and seek to increase investment in Hulu's content offerings and global distribution.
If the Comcast purchase was not painful enough for investors, those last two words – "international distribution" – should do a little worse. It seems that Disney has the intention to follow Comcast on the other side of the pond. Over time, Disney will be able to retain more of its content for global direct-to-consumer distribution, posing a growing threat to Sky's brilliant new acquisition of Sky that Comcast has just completed.
Comcast's decision to spend a lot more than Fox on Sky TV is curious to start. Add to that the fact that she is paying money for Fox's shares and that she could sell her stake in Hulu to Disney to help finance her acquisition, and that just puts herself in a bad position. Disney could soon have all the weapons she needs to really hurt Comcast.
Adam Levy has no position in the mentioned actions. The Motley Fool owns shares and recommends Walt Disney. The Motley Fool recommends Comcast. Motley Fool has a disclosure policy.
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