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Comcast drops out of Fox running

Disney CEO Bob Iger (left) and Fox boss Rupert Murdoch

US cable giant Comcast has dropped out of the bidding war for assets belonging to 21st Century Fox, clearing the way for a takeover by Disney.

Comcast will instead focus on its bid for European satcaster Sky, it said in a statement today.

“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,” said a spokesman for the company.

Comcast CEO Brian Roberts added: “I’d like to congratulate Bob Iger and the team at Disney and commend the Murdoch family and Fox for creating such a desirable and respected company.”

Disney initially offered US$52.4bn for the package, which includes Fox’s US cablenets and stakes in European satcaster Sky and production giant Endemol Shine Group, in December last year.

Comcast subsequently tabled a US$65m counter-offer,  leading to an improved US$71bn bid from Disney, valuing Fox shares at US$38 apiece.

Comcast was said to have been given confidence to bid by a US federal judge approving telecoms firm AT&T’s US$85.4bn mega-takeover of Time Warner, parent company of Warner Bros, HBO, Turner and CNN, in June.

Brian Roberts

The decision was expected to open the gates to a flurry of high-level M&A activity, in particular paving the way for the conclusion of the battle between Comcast and Disney for 21st Century Fox. But the US government announced it was appealing against the judge’s ruling last week.

Today’s news sees Comcast renew its focus on its bid for European satcaster Sky, a week after it upped its offer to £26bn (US$34.4bn).

21st Century Fox has long been trying to secure the 61% of Sky it doesn’t already own, but the process has become mired in red tape and government legislation over competition and media plurality.

NBCUniversal owner Comcast’s £14.75-per-share deal for Sky last week beat that of 21st Century Fox, which made its own £14-per-share offer less than 24 hours prior. That offer valued Sky at £24.5bn, beating Comcast’s previous offer that valued the company at £22bn.

Comcast’s fight with Disney for the 21st Century Fox assets brought additional complications to its attempt to buy Sky. Regulators had threatened to impose a rule known as the chain principle if Comcast continued bidding for both, meaning that if it raised its bid for Fox, it would also have to pay more for Sky.

Analysts therefore suggested at the time that this could lead to Comcast focusing its efforts more on Sky, rather than Fox, as it looks to ramp up its global interests, and that has come to pass today.

“There is a possibility Comcast puts a lot of chips backing its Sky bid and is less aggressive in its pursuit of Fox,” said Bloomberg Intelligence analyst Paul Sweeney earlier this month, adding that the cabler may “just want international scale.”

Jonathan Chaplin, an analyst at US-based New Street Research, added: “Of all the assets in the Fox portfolio, they probably view Sky as the most strategically important.”

However, Disney boss Bob Iger has previously called Sky “a real crown jewel” in the Fox assets it is trying to acquire.

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