Comcast opens $31bn bid war for Sky
April 25, 2018
By Colin Mann
Comcast has formalised its earlier pre-conditional superior cash offer for the entire issued and to be issued share capital of Sky. The offer is for $31 billion (€25.4bn). In a Statement, Sky said that as a result of the announcement of the higher cash offer, the Independent Committee was withdrawing its recommendation of the offer announced by 21st Century Fox on December 15th 2016 and was terminating the Co-operation Agreement entered into with 21CF on the same date.
“We are delighted to be formalising our offer for Sky today,” commented Brian L Roberts, Chairman and CEO of Comcast Corporation. We have long believed Sky is an outstanding company and a great fit with Comcast. Sky has a strong business, excellent customer loyalty, and a valued brand. It is led by a terrific management team who we look forward to working with to build and grow this business.”
“With its 23 million retail customers, leading positions in the UK, Italy, and Germany, and its history of strong financial performance, we see significant opportunities for growth by combining our businesses. Sky is a highly complementary business and will expand Comcast’s international footprint in the UK and Continental Europe. Sky will be our platform for growth across Europe. The combined customer base of approximately 52 million will allow us to invest more in original and acquired programming and more in innovation as we strive to deliver a truly differentiated customer experience. We look forward to receiving the necessary regulatory approvals.”
In the announcement, published in accordance with the UK’s City Code on Takeovers and Mergers, Comcast announced that it intends to make the following commitments regarding Sky and investment in the UK:
- Maintain annual expenditure in Sky News for ten years, at a level not less than incurred in Sky’s 2017 financial year;
- Establish an editorial Sky News board with the responsibility to ensure the editorial independence of Sky News for ten years;
- Maintain Sky’s UK headquarters in Osterley for five years; and
- Not acquire any majority interest in UK newspapers for five years.
Additionally, Comcast reaffirmed the following statements of intention given in its Rule 2.4 announcement on February 27, 2018:
- Continue to support the creative industries in the UK and increase investment in UK film and TV production;
- Support innovation in the UK by continuing to support Sky’s technology hub in Leeds;
- Continue to support young people in the UK by maintaining Sky’s Software Engineering Academy scheme; and
- Continue to support Sky’s local community sports programmes in the UK.
Comcast believes that, combined, Comcast and Sky will create a business equipped to compete more effectively in a rapidly changing and highly competitive industry. Together, the companies would be well positioned to drive growth to provide attractive returns to Comcast shareholders and to benefit the employees and customers of both organisations.
Under the terms of the Acquisition, Sky shareholders will be entitled to receive £12.50 in cash for each Sky share. In addition, Sky shareholders shall be entitled to receive any final dividend in respect of Sky’s financial year ended June 30, 2018, up to an amount of 21.8 pence per Sky share, which is declared and paid prior to the Effective Date (as defined in the UK Announcement).
Comcast’s superior cash offer represents a 16 per cent premium to the existing Twenty-First Century Fox, Inc. offer, and implies a value of $31 billion (£22 billion) for the fully diluted share capital of Sky.
The acquisition will enhance Comcast’s free cash flow per share in the first year, excluding one-time transaction-related expenses and, within a reasonable period of time, Comcast expects that the return on invested capital of the acquisition will exceed the weighted average cost of capital.
To provide financing in connection with the Acquisition, Comcast entered into an unsecured bridge credit agreement in an aggregate principal amount of up to £16 billion and an unsecured term loan credit agreement in an aggregate principal amount of up to £7 billion ($22 billion and $10 billion, respectively).
The Acquisition is subject to a number of pre-conditions and conditions as set forth in the UK Announcement, including receipt of antitrust and regulatory approvals and securing valid acceptances carrying in aggregate more than 50 per cent of the voting rights then normally exercisable at a general meeting of Sky.
The Statement from Sky said: “The Independent Committee of Sky welcomes today’s announcement by Comcast of its firm intention to make a £12.50 per share pre-conditional cash offer for Sky (the ‘Comcast Offer), which follows its initial possible offer announcement on 27 February.
The Independent Committee also welcomes the post-offer undertakings and commitments Comcast intends to give in relation to Sky’s existing business including Sky News, and believes that these voluntary commitments should comprehensively address any potential public interest concerns. In addition to Comcast and as required by the Takeover Panel, Sky also intends to give the same post-offer undertakings conditional upon the Comcast Offer becoming wholly unconditional.
As a result of the announcement of this higher cash offer, the Independent Committee is withdrawing its recommendation of the offer announced by 21CF on 15 December 2016 (‘21CF Offer) and is now terminating the Co-operation Agreement entered into with 21CF on the same date.
Accordingly, certain provisions of the Co-operation Agreement will cease to apply including the obligation on 21CF to pay a break fee of £200 million. The Co-operation Agreement ensures, however, that certain obligations on 21CF continue after such termination, including, unless the Independent Committee agrees otherwise, that: (i) the 21CF Offer cannot close without the approval of at least a majority of independent Sky shareholders and (ii) 21CF will continue to be bound by the standstill provisions agreed to in the Co-operation Agreement.
The Independent Committee is mindful of its fiduciary duties and has consistently sought to maximise value for all shareholders.
At this time, the Independent Committee notes that both offers are subject to pre-conditions and neither offer is currently capable of being put to shareholders. The Independent Committee intends to co-operate fully with both parties to secure the relevant approvals in order to satisfy the pre-conditions for both offers. Until the relevant pre-conditions are satisfied, Sky shareholders are advised to take no action.”
A further announcement will be made in due course.