Comcast tables hostile bid for Sky, markets wait for Fox/Disney's reaction

US broadcasting giant Comcast has put in a rival $31bn (£22.1bn) bid to buy Sky, in a direct challenge to Fox and Walt Disney, with markets seemingly expecting that Rupert Murdoch and Disney will be forced to come back to the table with their own revised offers.

America's largest cable TV operator offered £12.5 per share for the British outfit, trumping Fox's offer of £10.75 per share.

"We would like to own the whole of Sky and we will be looking to acquire over 50% of the Sky shares," Comcast chief Brian Roberts said in a statement.

Comcast's gambit also pits it against Walt Disney, which roughly two months before had agreed to pay $52.4bn (£37.42bn) for Fox's film and TV units

Significantly, as of 0834 GMT shares of Sky were already trading above Comcast's offer price, at 1,307.00, a possible indication that in anticipation of another counteroffer, traders weren't ready to change the channel just yet.

"In a normal takeover situation, the potential acquirer would be extremely keen to have the support of the largest shareholder in an effort to ease the deal through.

"Unlikely though it seems, this could yet happen, but it is equally plausible that Fox will need to return with an improved bid, which the market was beginning to anticipate in any event," said Richard Hunter, Head of Markets at Interactive Investor.

Analysts at Olivetree expressed a broadly similar view, telling clients: "The body-language here says there is real competitive tension for Sky (rather than some cosy deal behind the scenes).

"Comcast's timing is interesting, it allows them to start their regulatory filings, which could well conclude at a similar point to a Fox transaction being put in front of Sky shareholders. Comcast's approach should be very clean, the regulatory backdrop for them should be straightforward, and the 50% acceptance shows that they are happy to own the asset alongside Fox / Disney [as is the case in Hulu]. Whether Fox/Disney are happy to do the same remains to be seen."

And in the background [...] Netflix?

To keep in mind perhaps, according to a 7 December note from analysts at RBC, Walt Disney had roughly 22m reasons to go after Sky, namely its customer base (UK & Ireland (12.7m), Germany & Austria (5.0m) and Italy (4.8m )), which would allow it to leapfrog rival Netflix, which as of year-end 2016 had 19.7m subscribers in Europe.

With content increasingly the critical factor in modern media wars, Sky also offered "substantial" European content, including a deal with Time Warner-owned HBO and distribution deals for the Continent with all the major movie studios, RBC said.

As an aside, Comcast's decision to step into the fray comes ahead of a widely-expected provisional decision from the Competition and Markets Authority on Fox's proposed £11.7bn takeover, with the regulator reportedly sifting through the several thousands of submissions it received in response.

On 6 December, the CMA said, "in this case, we have received a large body of evidence – including numerous face-to-face hearings and more than 12,000 submissions – so it is vital that we spend the time to reach an informed and considered provisional view."

Indeed, press reports prior to that CMA announcement had indicated that Fox might be willing to step away from its bid, instead selling its 39% stake in Sky to Disney, given the possibility that its bid might fail.

However, according to analysts, under UK Takeover Panel rules the long-stop date for Fox to pull-out from its offer - if it failed to obtain the 'green light' from CMA - was 15 August 2018.

In any case, traders seem to believe there were still at least a chapter or two left to this story, with Laith Khalaf at Hargreaves Lansdown pointing out, "There may well be some reaction from 21st Century Fox. However, since the bid for Sky was launched, 21st Century Fox has agreed to sell many of its assets, including Sky, to Disney. It remains to be seen therefore what appetite Rupert Murdoch has to pursue Sky any further.

"This isn’t a done deal yet though. Sky shares are now trading 2% above the Comcast offer price, so the market clearly smells the scent of some more action before this saga draws to a close."