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How Comcast Won Sky’s 39% Stake from Disney and Fox


Sep. 27 2018, Updated 9:46 a.m. ET

Disney and Fox sell their Sky stake

21st Century Fox (FOXA), which had a 39% stake in UK-based pay-TV provider Sky, has decided to sell its stake to US cable giant Comcast (CMCSA) for ~11.6 billion pounds (or $15.3 billion). Walt Disney (DIS) has also agreed to Fox’s sale agreement with Comcast for 17.28 pounds per share.

The move came just days after Comcast won the auction for Sky’s 61% stake at a price of 17.28 pounds per share, defeating Fox’s bid of 15.67 pounds per share. Disney then decided to sell its stake, as it did not want a minority holding in Sky. Comcast, therefore, received full ownership of the European media group Sky.

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Disney to reduce its debt load

Disney had agreed to acquire Rupert Murdoch’s entertainment assets for $71.3 billion in half cash and half stock. After the sale of its 39% stake in Sky, Disney will remain on track to purchase Fox assets including film and TV studios, cable networks such as FX Networks and Fox Sports Regional Networks, Fox Networks Group, stakes in National Geographic Partners, Indian satellite TV group Star India, Hulu, among others.

Disney’s sale of its Sky stake will reduce its debt load from buying Fox. Moreover, Disney is expected to use the proceeds to invest aggressively in content creation. Disney is also trying to sell Fox’s regional sports assets, which was a pre-condition to get approval from US regulators and further reduces the cost of the Fox deal.

At the end of June 2018, the cash-to-debt ratio for Disney is 0.18x. Usually, the company can pay off its debt using cash in hand if the ratio is more than one. Therefore, the company has suspended its share repurchase program, as the company is in the middle of the Fox acquisition of media assets. Disney expects to resume share repurchases after it improves its cash-to-debt ratio.


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