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Comcast Locks Up Bulk of Sky Shares

Jeff Baumgartner
10/9/2018
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Wasting precious little time as it prepares to alter the video landscape in large parts of Europe, Comcast announced Tuesday that it has wrapped up the purchase of more than 75% of the outstanding shares of UK-based pay-TV giant Sky, including the 39% stake in Sky that was formerly controlled by 21st Century Fox.

Comcast Corp. (Nasdaq: CMCSA, CMCSK) said its offer for Sky (NYSE, London: SKY) has become "unconditional," as the Philadelphia-based cable and media giant is now the majority owner of Sky. Comcast noted that it expects Sky to be delisted from the London Stock Exchange by November 7.

The latest milestone was reached about two weeks after 21st Century Fox announced it would sell its stake in Sky in light of the "premium" that Comcast had already offered to snap up a controlling stake in the UK-based pay-TV company. Comcast had earlier outbid 21st Century Fox for control of Sky for £17.28 (US$22.59) per share. (See Fox to Unload Sky Stake for $15B, Comcast Outbids Fox for Sky With Offer of £17.28 Per Share and Will Comcast's Pricey Play for Sky Pay Off?)

In a statement, Comcast Chairman and CEO Brian Roberts said the deal will pave the way for the company to "accelerate investment and growth in Sky's brand and premier platforms." He added that Comcast is likewise "fully committed to ensuring Sky News' future" and pledging to uphold Sky News' editorial independence.

Sky CEO Jeremy Darroch echoed that Comcast would invest further in Sky, including its Osterley and European headquarters.


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Hulu Hullabaloo
A big, possibly contentious question ahead is whether Comcast will sell or retain its 30% stake in Hulu LLC , the US-based SVoD and OTT-TV service. Walt Disney Co. (NYSE: DIS) (via its acquisition of Fox) will have a controlling 60% stake, while AT&T Inc. (NYSE: T) (via WarnerMedia) will hold the remaining 10%.

Though selling its stake in Hulu would reduce the overall outlay for Sky, speculation is growing that Comcast could opt to stand pat.

In addition to annoying Disney, keeping its Hulu stake would also help Comcast keep tabs on "critical data" about online video viewing habits and apply that knowledge where needed, The Wall Street Journal argued early this week.

BTIG Research analyst Richard Greenfield expressed a similar opinion in September (registration required). He noted that by keeping its Hulu stake, Comcast could hinder Disney's direct-to-consumer strategy, keep NBCU's lucrative licensing agreement deal with Hulu stoked and get an "inside peak" at direct-to-consumer economics and subscriber trends. Oh, and Greenfield and WSJ are also aligned in their thinking that Comcast staying in will also tick off Disney -- perhaps a factor that overrides them all.

"These two companies and their executives are NOT friends," Greenfield wrote. "This is war; Comcast remaining in Hulu and keeping three Board seats that enable them to have a say in Hulu's future will drive Disney absolutely crazy. This might be reason enough to keep the 30% stake."

— Jeff Baumgartner, Senior Editor, Light Reading

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