Comcast drops bid for 21st Century Fox assets to focus on Sky takeover

19 July 2018, 13:47

The US cable giant Comcast has abandoned its takeover bid for 21st Century Fox's entertainment assets, saying it wants to concentrate on its attempt to buy Sky plc, the owner of Sky News.

Comcast launched a $65bn (£50bn) offer for Fox's entertainment assets at the end of June, which include Hollywood's fourth-largest movie studio, US cable networks including FX and National Geographic, as well as international pay television assets including Star TV in India and its shareholding in Sky.

That offer trumped an existing deal struck between Rupert Murdoch, Fox's executive chairman, and Disney just before Christmas.

Since then, however, Disney has raised its offer to $71.3bn (£55bn).

Wall Street has been agog to see whether Comcast would strike back with a higher offer but, on Thursday, the cable giant walked away from the battle.

It leaves Disney free to buy Fox's assets - bringing together two of Hollywood's largest film studios in Tinseltown's biggest shake-up since the 1930s.

The company said: "Comcast does not intend to pursue further the acquisition of the 21st Century Fox assets and, instead, will focus on our recommended offer for Sky."

Brian Roberts, Comcast's chairman and chief executive, said: "I'd like to congratulate [Disney chairman and chief executive] Bob Iger and the team at Disney and commend the Murdoch family and Fox for creating such a desirable and respected company."

Shares of 21st Century Fox have fallen by 1.5% in pre-market trading.

Comcast's decision to walk away from the battle for Fox's assets could mean an intensification of the battle to take control of Sky.

Fox, which is currently Sky's biggest shareholder with a 39.1% stake, sought to take full control of the company in December 2016 with an offer valuing the company at £18.5bn.

That bid was snared up in regulatory investigations - leaving Comcast free to swoop in February with a £22.1bn offer of its own.

Fox hit back with a raised offer of £24.5bn earlier this month, once it became clear that the UK government would allow its takeover to proceed, but Comcast responded just hours later by raising its offer to £26bn.

That offer, which values Sky shares at 1475p each, is currently the highest on the table and has been recommended to Sky shareholders by a committee of the broadcaster's independent directors.

Since then, Sky shares have risen to as much as 1551p each, in expectation that Fox would come back with a higher offer.

However, they dropped by 26p to 1505p immediately after the Comcast statement, as some investors bet that Comcast's renewed determination to buy Sky may deter Fox from sweetening its terms.

They were down by a further 15p to 1490p by market close.

Comcast, like Fox and Disney, has made legally binding commitments to preserve the editorial independence and funding of Sky News.

Two factors are thought to have persuaded Comcast to concentrate on its Sky bid and walk away from the battle for Fox's entertainment assets.

The first is that some investors were becoming concerned at the amount of debt that Comcast would have had to have taken on in order to buy both Sky and the Fox assets.

The second is that, earlier this week, the US Justice Department said it would appeal against a court ruling allowing the telecoms giant AT&T; to buy entertainment company Time Warner.

If the Justice Department succeeds in overturning that ruling, which was seen as favourable to Comcast, it would make it harder in turn for Comcast, which owns the US TV network NBC and the Universal Pictures film studio, to buy the Fox assets.

Both Comcast and Disney have been keen to buy the Fox assets and Sky as a way of getting their hands on more content and see off the growing threat from internet competitors such as Netflix and Amazon Prime.