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Looking into Disney’s Stance on the Sky Bid

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Aug. 17 2018, Updated 9:30 a.m. ET

The race for Sky’s assets

Both 21st Century Fox (FOXA) and Comcast (CMCSA) are bidding for the remaining 61% stake in European broadcaster Sky’s assets. These companies recently upped their stakes, as the companies are striving to grow their content portfolios with premium media assets.

Sky also has a significant international presence, which is expected to help the companies to expand their reach internationally. Sky operates in five countries—Austria, Germany, Ireland, Italy, and the UK—and has nearly 23 million pay-TV subscribers across Europe. Walt Disney’s (DIS) pending purchase of Fox’s assets is expected to give Disney a 39% stake in European pay-TV provider Sky plc.

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Disney and Comcast’s battle for Sky

Fox initiated with a bid of $15.5 billion for a 61.0% stake in London-based Internet service provider Sky in December 2016. This bid was topped by Comcast’s offering of ~$31.0 billion. Fox then increased its offer to ~$33.0 billion but was superseded by Comcast’s offer of ~$34.0 billion for the Sky stake.

Now, it’s Fox’s turn to raise its bid for Sky. Disney stated in its July SEC filing that Fox might not raise its offer price for the Sky acquisition. An increase in Sky’s bid price is expected to increase Fox’s debt load and would require Disney’s consent.

According to industry sources, Disney might not agree to let Fox raise its bid for Sky. There is a chance that Disney could decide to sell Fox’s 39% stake in Sky to reduce the overall cost of the deal.

Comcast’s acquisition of Sky assets would become more important since Comcast has withdrawn its bid to buy Fox assets. Comcast has been losing its video customers as some traditional cable subscribers have shifted toward the fast-growing streaming rivals. In the second quarter, Comcast lost 136,000 residential video customers, compared to 45,000 lost customers in the second quarter of 2017.

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