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Comcast, Fox, Disney shares fall as investors weigh potential Sky bidding war

March 5, 2018    //   By Isabela Varela and Anna Akins

Comcast Corp. surprised investors during the week ended March 2 by announcing its intention to challenge 21st Century Fox Inc.’s longstanding effort to take full control of the British pay TV giant Sky plc.

Comcast announced Feb. 27 a proposal to offer £12.50 per share for Sky, valuing the British telecommunications entity at about £22 billion, or around $31 billion. While the proposal does not yet constitute a formal bid, the cable giant’s offer would compete with Fox’s earlier announced formal offer of £10.75 per share for the nearly 61% of Sky that Fox does not already own. It remains unclear who would prevail if a bidding war broke out for Sky or if the companies could come to a joint ownership proposal. Fox, which is already a major stakeholder in Sky, has said it “remains committed” to its earlier offer to buy the rest of the company.

Recent reports claim Fox is under increased pressure to improve its December 2016 offer for Sky after the latter secured a range of Premier League rights packages under a three-year contract for £1.19 billion per year. Fox’s Sky offer is also facing increasing regulatory scrutiny in Britain. Fox agreed to pay a termination fee of £200 million if the deal fails to obtain regulatory approvals.

Comcast had been eyeing a bid for Fox itself last year, but chose to bow out of a potential bidding war because Comcast executives said they did not see a “strategic fit” with the Fox assets up for sale. Walt Disney Co. offered to acquire Fox’s international and domestic assets for about $52.4 billion in December 2017. If Sky does move ahead with the Fox deal, Disney would ultimately assume full control of Fox’s shares after its deal for Fox’s assets closed.

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All of the major players surrounding the Sky deal intrigue saw shares fall amid reports that a bidding war was likely to break out. Comcast’s shares ended trading March 2 at $36.49, down 7.6% since the close of the prior week. Shares of Fox closed at $36.37 on March 2, down about 4.3% for the week. Disney’s shares ended at $102.99, down about 4% on the one-week chart.

Turning to the music streaming service space, Pandora Media Inc.’s shares saw some rocky trading midweek as news broke that the parent company of streaming music rival Spotify AB had filed Feb. 28 for an initial public offering of up to $1 billion of its ordinary shares.All of the major players surrounding the Sky deal intrigue saw shares fall amid reports that a bidding war was likely to break out. Comcast’s shares ended trading March 2 at $36.49, down 7.6% since the close of the prior week. Shares of Fox closed at $36.37 on March 2, down about 4.3% for the week. Disney’s shares ended at $102.99, down about 4% on the one-week chart.

Spotify, which applied to list its ordinary shares on the New York Stock Exchange under the symbol SPOT, will be offering as a direct listing. The opening public price of Spotify’s ordinary shares on the NYSE will be determined by buy and sell orders collected by the NYSE from broker/dealers.

Pandora’s shares closed at $4.48 on March 2, up about 4% from the Feb. 23 close. The stock hit $4.17, its lowest point of the week, earlier March 2 before rallying later in the day.

In the entertainment technology business, TiVo Corp. saw its shares soar after the company on Feb. 27 said in its fourth-quarter 2017 earnings release that it is exploring strategic alternatives, including a potential sale. The options under consideration “range from transformative acquisitions that would accelerate our growth, to combining our business with other leading players, to becoming a private company,” the company said. TiVo has engaged LionTree Advisors to help evaluate options.

TiVo’s stock closed at $14.45 on March 2, up about 5% from its Feb. 23 closing price.

Meanwhile, DISH Network Corp.’s shares steadily declined after S&P Global Ratings on Feb. 26 downgraded the company’s corporate credit rating to B from B+. The outlook is negative. The rating agency also lowered its issue-level ratings on the unsecured debt issued by DISH DBS Corp. to B from B+. The issue rating on DISH’s convertible notes was lowered to CCC+ from B-. S&P Global Ratings and S&P Global Market Intelligence are owned by S&P Global.

The downgrade reflects “continued deterioration in DISH’s satellite TV business stemming from heightened competition, shifting consumer preferences, and mature industry conditions that have resulted in weaker credit metrics than previously expected,” S&P said Feb. 26.

DISH’s shares closed at $40.98 on March 2, down about 8% for the week.