Over the past year, the rivalry has ramped up between Comcast (NASDAQ:CMCSA) and Disney (NYSE:DIS). Not only are they battling it out for many of the film and television assets of Twenty-First Century Fox (NASDAQ:FOXA) (NASDAQ:FOX), but the two companies have also opened a separate front in a tug-of-war for British cable TV provider Sky PLC (NASDAQOTH:SKYAY), with Fox acting as proxy for the House of Mouse.
Just yesterday, Fox announced that it had increased its offer to 14.00 pounds per share, about $18.55 at current exchange rates, for the portion of Sky it doesn't already own. The Fox bid was followed quickly by a counter-offer by Comcast -- on the same day -- for 14.75 pounds, roughly $19.48. This tops a previous offer of 12.50 pounds, or roughly $16.56, made by Comcast back in February, and the original bid by Fox of 10.75 pounds, or $14.24, which it made late last year.
The real question, though, is: What's so special about Sky that it would spark a bidding war?
The Sky's the limit
Fox already owns roughly 39% of the pay-TV service and has long dreamt of owning the rest, having first attempted to buy the remainder of the company in December 2016. Sky boasts 23 million viewers in the U.K., Ireland, Germany, Austria, and Italy, and controls key media rights to broadcast English Premier League soccer games.
Disney CEO Bob Iger called Sky the "crown jewel" of European cable, as the company possesses a compelling combination of content and distribution capabilities allowing it to better compete in a world that increasingly favors streaming. Sky sports a growing library of exclusive premium content, and has been increasing its investment in original programming in order to contend with streaming giants like Netflix.
Sky spent more than $9 billion on programming last year, with a host of original programs, sports rights, and licensed shows. The company also has a significant distribution network in Europe that isn't limited to cable and satellite TV. Sky provides both broadband and mobile services in key markets in Europe, and offers streaming-only services in Spain and Switzerland with plans to expand to other countries.
The advantages for both Comcast and Disney are clear. Either would expand its international footprint and gain a business that dovetails nicely into its existing entertainment and sports network. And the addition of new content would help feed either company Sky's current cable operations and bulk up its content library, particularly as Disney prepares to make a meaningful entry into the streaming market late next year.
The bigger picture
Regulators were originally hesitant to approve the Sky-Fox deal, launching an in-depth review, on fears the controlling Murdoch family would gain too much influence over the news cycle. In light of Disney's intention to acquire Fox, the government in the U.K. gave provisional approval for the deal, with the stipulation that Fox would spin off Sky News, though the U.K.'s secretary of state must still approve the revised agreement.
Fox's latest bid and Comcast's counter for Sky comes against the backdrop of an escalating price war between Disney and Comcast over which will eventually control Fox. Back in December, Disney agreed to acquire Fox in an all-stock bid valued at $52.4 billion. Comcast countered in June with a cash offer of $65 billion, but Disney came back with a $71.3 billion cash and stock bid just a week later. U.S. antitrust regulators have already approved Disney's attempts to buy Fox.
The final stretch?
The final chapter in this compelling drama may be coming to an end. Both Disney and Fox shareholders are scheduled to vote on the deal on July 27, and a ruling from the British government regarding Fox's original bid for Sky is expected on July 12.
Comcast was said to be weighing its next move, and with the company upping its ante, there's speculation that the cable giant could drop its attempt to acquire Fox altogether and focus its efforts on Sky. It's rapid counter-offer could be in furtherance of that strategy.