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Comcast and the Many Benefits of Sky

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Nov. 20 2020, Updated 12:31 p.m. ET

Comcast-Sky deal

On September 22, Comcast (CMCSA) was announced the winner of a three-round auction held by the United Kingdom’s Panel on Takeovers and Mergers. Comcast bid $38.8 billion for 61% of UK broadcaster Sky. The shareholders and board of directors of Sky will most likely accept Comcast’s offer of 17.28 pounds per share by October 11 since it’s in the best interest of shareholders. Comcast beat Twenty-First Century Fox’s (FOXA) bid of 15.67 pounds per share.

On September 26, Fox and the Walt Disney Disney Company (DIS) decided to sell their Sky shares to Comcast, valuing Fox’s 39% stake at 11.6 billion pounds (or $15.3 billion). After the completion of the acquisition of Fox’s 39%, Comcast will gain 75% of Sky’s share of capital.

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Sky is a desirable asset

Sky is a leader of pay-TV services in the United Kingdom, as well as other regional markets such as Germany and Italy. It operates in five countries and has ~23 million pay-TV subscribers across Europe. Comcast will thus gain a global footprint to add to its efforts to expand in international markets.

The Sky deal is expected to boost Comcast’s international revenue to 25% from the current 9% generated outside the United States. Comcast believes the deal will be accretive to its cash flow in the first year of completion.

The addition of Sky could increase Comcast’s customer base from 30 million to more than 50 million customers in the United States and the European Union. It would give Comcast original TV productions such as Babylon Berlin and Britannia, as well as premier sporting channels to compete with digital rivals Netflix (NFLX) and Amazon (AMZN), which have been investing billions in original content and programming to attract traditional cable subscribers. Now TV, Sky’s video-streaming business, will also compete with Netflix around the globe.

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