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Attention turns to bid price after Sky's football winner

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02/15/2018 | 10:30am CET
FILE PHOTO:Sky News logo is seen in west London

LONDON (Reuters) - Sky (>> Sky) has tightened its grip on English Premier League football rights at a lower price than it currently pays, fuelling speculation that Twenty-First Century Fox (>> Twenty-First Century Fox) could now be forced to pay more to buy the broadcaster.

LONDON (Reuters) - Sky (>> Sky) has tightened its grip on English Premier League football rights at a lower price than it currently pays, fuelling speculation that Twenty-First Century Fox (>> Twenty-First Century Fox) could now be forced to pay more to buy the broadcaster.

The positive result for Rupert Murdoch's European pay-TV company could strengthen the hand of shareholders who want Fox to raise its offer to buy the 61 percent of the group it does not already own.

Walt Disney Co (>> Walt Disney Company (The)) also had an interest in the outcome because if its $52 billion (37.52 billion pounds) deal to buy Fox assets is cleared, it will end up owning either all of Sky, or the 39 percent stake that Fox currently holds.

Shares in Sky rose 3.5 percent to a two-year high of 10.98 pounds, exceeding the 10.75 pounds per share that Fox agreed to pay for the group in December 2016.

Analysts at Jefferies said Sky, which has used Premier League football to help build its pay TV business over more than two decades, had emerged as the winner in the auction for domestic TV rights from 2019-22.

"Retaining the bulk of English Premier League rights was key for Sky to maintain its premium position, but to do so and secure a lower outlay is a bonus," they said.

Some investors had already argued that Sky should fetch a higher price after Disney agreed to buy Fox's film, television studios and other assets at a price which they said represented a higher multiple than Fox agreed for Sky.

Hedge fund manager Crispin Odey, who has a stake in Sky, has long argued that Fox should be stumping up more.

"It looks like they're not going to get it at the original price," he told Reuters on Wednesday.

"Our view is they won't get it for less than 13.40 pounds."


Of the seven packages of matches on offer for three seasons from August 2019, Sky won four for a total outlay of 3.58 billion pounds, while BT will pay 885 million pounds for its one package.

Sky said it was spending 16 percent less per game than under its present three-year deal.

Two of the seven packages, both of which involved rights to simultaneous screening of a block of matches, remained unsold at this point, indicating that the Premier League had not met its reserve price.

Analyst Polo Tang at UBS, who forecast no rise in the price Sky would pay when most were expecting a 20-30 percent jump, had said a good result would suggest scope for a higher Fox offer.

He said in theory the outcome would lead to a 500 million pound boost to the consensus for 1.7 billion pounds earnings in the 2020 financial year.

"We believe Sky will likely use some of this headroom to invest more in original programming," he said. "(But) materially higher levels of profitability at Sky could lead to shareholders seeking a higher offer price from Fox."

Comcast Corp (>> Comcast Corporation) is also considering an intervention in the Disney deal and making a competing offer for the Fox assets, Reuters reported. Such a move could further stoke expectations that Sky is worth more than Fox has agreed to pay.

"There's a lot going on now," Odey said of Comcast's potential interest.

Like Odey, hedge fund Polygon has questioned the price that Fox has offered and said in December that it thought Sky was worth more than 13 pounds a share.

Elliott, the U.S. hedge fund best-known for its activist campaigns at companies, including forcing bidders to pay more during takeovers, has also been stakebuilding in Sky recently and lifted its interest to 1.99 percent last week.

Elliott has not given a reason for its Sky investment and declined to comment on Wednesday.

(Editing by Keith Weir)

By Paul Sandle and Ben Martin

Stocks mentioned in the article
ChangeLast1st jan.
COMCAST CORPORATION 1.80% 39.5 Delayed Quote.-3.12%
SKY 0.59% 1104.5 Delayed Quote.9.14%
TWENTY-FIRST CENTURY FOX 2.29% 38.01 Delayed Quote.7.62%
WALT DISNEY COMPANY (THE) 1.91% 107.25 Delayed Quote.-2.11%
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Financials ( GBP)
Sales 2018 23 871 M
EBIT 2018 3 860 M
Net income 2018 2 167 M
Debt 2018 9 265 M
Yield 2018 6,78%
P/E ratio 2018 10,81
P/E ratio 2019 9,08
EV / Sales 2018 1,35x
EV / Sales 2019 1,36x
Capitalization 23 068 M
Duration : Period :
BT Group Technical Analysis Chart | BT.A | GB0030913577 | 4-Traders
Technical analysis trends BT GROUP
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Average target price 3,23  GBP
Spread / Average Target 39%
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Gavin E. Patterson Chief Executive Officer & Executive Director
Jan Petrus du Plessis Chairman
Howard Watson Chief Executive Officer-Technology & Operations
Simon Jonathan Lowth Group Chief Financial Officer & Executive Officer
Anthony Frank Elliott Ball Independent Non-Executive Director
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