Fox: We're still committed
A late update: Rupert Murdoch’s 21st Century Fox have - finally - responded to Comcast’s offer.
Fox says:
New York, NY, February 27, 2018 - 21st Century Fox (“21CF”) notes the possible offer announcement made by Comcast Corporation (“Comcast”) for Sky plc (“Sky”).
21CF remains committed to its recommended cash offer for Sky announced on 15th December 2016.
We note that no firm offer has been made by Comcast at this point. A further statement will be made if appropriate.
Fox says it “remains committed” to its original offer, no bid raise yet. Will potentially reassess if Comcast offer progresses. https://t.co/mqNdCM5YHy
— Mark Sweney (@marksweney) February 27, 2018
Breaking: Fox finally breaks its silence.
— Joe Mayes (at #MWC18) (@Joe_Mayes) February 27, 2018
👉Says it's still committed to its offer for Sky
👉Says no formal bid has been made by Comcast
👉Will make further statement if appropriate
Big question still remains - will they up their offer?https://t.co/nLvwWsuoxP pic.twitter.com/dRrfJn3cA6
European markets edge lower
Hints from new Federal Reserve chair Jerome Powell that there could be four rather than three US rate rises this year have pushed up the dollar and left stock markets flagging.
Despite Sky closing 20% higher at £13.31 - above the bid price from US group Comcast - the FTSE 100 ended in negative territory. European markets also ended the day marginally lower. The final scores showed:
- The FTSE 100 finished 7.13 points or 0.1% lower at 7282.45
- Germany’s Dax dipped 0.29% to 12,490.73
- France’s Cac closed down 0.01% at 5343.93
- Italy’s FTSE MIB bucked the trend, up 0.08% at 22,724.46
- Spain’s Ibex ended down 0.02% at 9900.2
On Wall Street, the Dow Jones Industrial Average is currently down 21 points or 0.09%.
On that note, it’s time to close for the day. Thanks for all your comments, and we’ll be back tomorrow.
Republican Claudia Tenney asks about more transparency during the blackout period around meetings.
Powell says, I would have to look at what you’re proposing. The blackout gives us a chance to do our thinking and come out and make an announcement, then after a day or two people can make speeches.
Generally it’s been seen as a good thing to step away for a period.
Democrat Denny Heck asks when America will get a raise, saying 2.9% wage growth is well below historic averages.
Powell says, in time wages should grow, but we really need to have more productivity.
Republican Barry Loudermilk asks about what the Fed is doing on cyber security to protect its data.
Powell says I’m going to put a high priority on it. We’ve done a good job but we can do better.
Democrat Joyce Beatty asks if the stock market is an indicator for the economy.
Powell says we don’t manage the stock market, it enters into our thinking, it’s not the economy but it plays a factor.
Democrat Ruben Kihuen asks what Fed or congress can do to combat wage inequality?
Powell says our part is to try and achieve maximum employment, which we are doing. The only way for wages to go up is for productivity to go up, which needs investment. Those are things congress and the administration would be well advised to focus on.
Democrat Gwen Moore asks if inflation target should be say 2.5%.
Powell says we are committed with a 2% goal, equally concerned about undershoots and overshoots.
Moore asks about inequality in the US and brings up the tax reforms again. What concerns does the Fed have about income inequality.
Powell says there has been a stagnation of middle class median incomes. We need to have a better trained workforce.
Moore asks if we will have this tremendous GDP growth after tax cuts, or will it be under 1%.
Powell says the tax bill and budget agreement came after the December meeting. There will be a meaningful increment in demand over next couple of years from these things.
I expect wages to increase this year.
Rothfus asked why is the inflation target 2%.
Powell says it gives us more room for manoeuvre, in terms of cutting interest rates if necessary. It oils the wheels of the economy and gives us more ammunition. It has become the global standard and it would not be difficult for a central bank to move from it.
Back on safer ground (probably) Republican Keith Rothfus says, there are four vacancies on Fed, can it fulfill its duties under those circumstances?
Powell says he would like vacancies filled, We don’t need all seven [Fed members] immediately but would be good to have more faces on the hall.
Updated
Here’s a tricky one for Powell.
Democrat David Scott says Trump’s tax cuts help just 1%, budget cuts hit the Afro-American poor, there are changes to food stamp system. The Fed should get on our side. Trump is not on side of the American people.
Powell hesitates. He says, these are very important issues, i take it to heart, but they are not issues we have authority over.
Scott says he was waiting for that. He says, there is no one better suitied. When you sneeze, Wall street tumbles. I know you have a deep compassion for people. You should say, hold on Mr President, this isn’t right.
Scotts time runs out before Powell can respond again.
Democrat Stephen Lynch asks about whether the Fed is concerned about the risks of exchange traded funds [in the wake of recent market volatility]
Powell says, the markets were generally orderly through the volatility, I don’t think etfs were at the heart of what went on. We are talking to other agencies, it’s a question to be looked into.
Republican Frank Lucas asks about the outlook for the economy.
Powell sayd, it does feel to me the next couple of years will be quite strong, should be good years for the economy and I would think should create a good environment.
Chris Beauchamp, chief market analyst at IG, says:
The new Fed chairman appears to have his feet firmly under the desk. Not only has he managed to send the dollar flying higher, unseating GBPUSD and EURUSD in impressive fashion, but he has added to this by boldly stating that QE remains a tool that will firmly remain in the Fed’s armoury. At a time when QE is coming under criticism again, his defence will be taken as a sign that the Fed has not abandoned this powerful weapon, tightening cycle or no tightening cycle.
While equities wobbled as the Q&A session developed, investors seem to have warmed to his tone and careful approach. This first date appears to be going well, with markets apparently content that Powell is firmly in the Bernanke/Yellen mould that they know so well, and isn’t about to rock the boat.
Democrat Michael Capuano talks about the British ruling on the gender pay gap, and says there was a call for something similar in the US but the Trump administration stopped it. He says that is horrendous and for a fair economy, you need the numbers and the information for getting towards pay equity. Is the Fed interesting in pursuing some degree of investigation of how the financial institutions it oversees pay their employees.
Powell says he is not familiar with these rules, this is for Congress. We have a job and we want to stick to that. I don’t think it’s a question for the Fed, it’s for others.
Dollar index touches 5 1/2-week high during Powell testimony https://t.co/UuAzitzp8I
— Anneken Tappe (@AnnekenTappe) February 27, 2018
#UST, #USD: Hawkish Powell - when asked about what would cause the Fed to hike more than 3 times, he says that Fed will update projections in March but he has become more confident. Expect EUR/USD to trade down to the low end of 1.21-1.26 range and 10y UST yield to break higher.
— Danske Bank Research (@Danske_Research) February 27, 2018
Updated
Democrat Gregory Meeks asks how much of the corporate tax cuts will go to wages rather than stock buybacks or dividends?
Powell says there are estimates out there but we don’t have a Fed estimate of that kind of thing.
With the dollar rising and bond yields moving higher, equity markets are heading in the other direction. The Dow Jones Industrial Average is now down 78 points or 0.27%.
Dollar rises as market bets on four rate rises this year
Powell’s comments about the strengthening economy etc suggest he may be thinking of more than three rate rises this year, and the foreign exchange market thinks so, with the dollar gaining ground as he speaks.
US bond yields are also rising, on the expectation of further interest rate rises.
U.S. bond yields rise as Powell testimony continues https://t.co/1wTodb3mOS pic.twitter.com/2EYx3MqNvq
— Bloomberg Markets (@markets) February 27, 2018
Updated
Carolyn Maloney asks, what would cause you to raise rates more than three times this year?
Powell says at the December meeting, the median projection was three rises. There will be another projection in three weeks at the next meeting, but since [December] we have seen an increasing strengthening of the economy, inflation is moving to target, there is growth around the globe and fiscal policy has been more accommodative.
He says, We will be reviewing our projections, [for the next meeting] and I would not want to prejudge it.
Maloney asks, has the outlook changed in light of the tax reforms and the budget agreement?
Powell says, my personal outlook for the economy has strengthened since December, we’ll be taking into account everything that’s happened since December.
Updated
Republican Andy Barr says we have seen a wave of bonuses since tax cuts were announced, and will this increase wages?
Powell says it is hard to trace through the effects of tax cuts on wages. Lower taxes should lead to higher investment, which should lead to higher productivity, which should lead to higher wages over time.
Asked about risks of the unconventional monetary policy, Powell plays this down.
He says the financial sector shows modest risk. There are some high asset prices, but no buildup of leverage among households.
Fed's Powell: Fed's symmetric inflation objective works; inflation will be buffeted by various forces
— DailyFX Team Live (@DailyFXTeam) February 27, 2018
Following the testimony, the committee chair Hennsarling asks about the 2% inflation target and whether the Fed will move from it or replace the target with a range.
Powell says the committee would be concerned about concerted deviation above or below the target. The market understands this.
Updated
Fed's Powell begins testimony
The congress meeting has begun, and a number of senators are having their say before Fed chair Jerome Powell gets to read his testimony.
The Republican chair of the financial services committee Jeb Hensarling says there should be a sustainable path to a more normal policy and says the Fed should “stay in its lane.”
Democrat Maxine Waters attacks the government’s policies and says it is trying to undermine the Fed.
After a few more partisan comments, Powell is up.
Updated
Following its move on Sky, Comcast shares have lost around 6% in early trading.
21st Century Fox is down 1% while Disney, which is bidding for Fox, has lost 1.9%.
Wall Street makes mixed start
Following Jerome Powell’s comments on interest rates and the strength of the US economy, US markets are struggling for direction in early trading.
The Dow Jones Industrial Average is currently up 24 points or 0.09%, while the S&P 500 opened up just 0.03% and the Nasdaq Composite fell by a similar amount.
ING Bank however expects four rate rises this year, with the first next month. Economist James Knightley says:
Jay Powell’s first testimony before Congress as Fed Chair emphasises continuity from Chair Yellen with a repeat of the policy of gradual rate hikes. Ahead of his testimony there was some speculation that he could adopt a slightly more dovish stance, but the written submission doesn’t back this up. Instead, Powell suggests the economic outlook “remains strong” while stating ”some of the headwinds the U.S. economy faced in previous years have turned into tailwinds”, namely fiscal policy and foreign demand.
He also hints that inflation is likely to rise, repeating Janet Yellen’s position that some of the “shortfall” in inflation likely reflects “transitory influences that we do not expect will repeat”. He also sounds fairly relaxed about the recent market volatility, saying that despite this, “financial conditions remain accommodative”. Moreover, financial conditions are not “weighing heavily” on the economy...
As such, the tone of Powell’s written testimony suggests that the Fed position hasn’t really changed under its new leadership with gradual hikes remaining the theme. However, his hints at the upside potential for inflation and the increasing positives for growth suggest the risks are skewed towards a more aggressive monetary policy response. At the moment the Fed are projecting three rate hikes this year while financial markets are currently pricing in around 80bp of rate hikes. Given our above consensus 3% GDP growth forecast for 2018 and the potential for inflation to rise more quickly than many in the market anticipate (wages, dollar weakness, medical care costs, cell phone data distortions, commodity prices), we are now forecasting four rate rises this year. We look for one every quarter – starting with the March 21 FOMC meeting.
Testimony from Fed Chairman Jerome Powell very consistent with what predecessor Janet Yellen might have delivered. Continuity is good for markets and economy, but it is early in his tenure and the underlying conditions are stable. #FOMC
— Mark Hamrick (@hamrickisms) February 27, 2018
Danske Bank reckons three US rate hikes are still on the cards this year:
🇺🇸#Fed's #Powell slightly hawkish, as #Fed seems more confident in its economic outlook. Not enough for the #FOMC to change its "3 hikes" signal for this year, in our view. In the image, we have highlighted the key takeaways from the speech $USD $EURUSD pic.twitter.com/uaGhIaWYVm
— Danske Bank Research (@Danske_Research) February 27, 2018
The full text of Powell’s testimony is here.
Powell backs gradual increases in US interest rates
More detail from Powell’s comments, including the expectation of further gradual interest rate rises. But he is not specific about whether that means three or four rises in the rest of the year, something which has been exercising investors:
While many factors shape the economic outlook, some of the headwinds the U.S. economy faced in previous years have turned into tailwinds: In particular, fiscal policy has become more stimulative and foreign demand for U.S. exports is on a firmer trajectory. Despite the recent volatility, financial conditions remain accommodative. At the same time, inflation remains below our 2 percent longer-run objective.
In the Federal Open Market Committee’s view, further gradual increases in the federal funds rate will best promote attainment of ... our objectives. As always, the path of monetary policy will depend on the economic outlook as informed by incoming data.
Fed chair Powell's testimony released
Breaking: The world’s newest and most powerful central bank chief has declared that America’s economic outlook remains strong.
Federal Reserve chair Jerome Powell has told the US House Banking Committee that the Fed will “strike a balance” between the risk of an overheating economy and the need to keep growth on track.
Powell’s testimony has been released ahead of his appearance at Congress in under 90 minutes time.
Skimming it quickly, I can’t see any major shocks. Powell seem to be sticking to the same position as his predecessor, Janet Yellen; namely, that the recovery is robust, and borrowing costs should rise - in a careful fashion - to keep inflation under control.
For example, Powell says:
Against this backdrop of solid growth and a strong labor market, inflation has been low and stable. In fact, inflation has continued to run below the 2% that the FOMC judges to be most consistent over the longer run with our congressional mandate.
Insisting that the economic outlook is strong, Powell adds:
The robust job market should continue to support growth in household incomes and consumer spending, solid economic growth among our trading partners should lead to further gains in U.S. exports, and upbeat business sentiment and strong sales growth will likely continue to boost business investment.
Moreover, fiscal policy is becoming more stimulative. In this environment, we anticipate that inflation on a 12-month basis will move up this year and stabilize around the FOMC’s 2 percent objective over the medium term. Wages should increase at a faster pace as well. The Committee views the near-term risks to the economic outlook as roughly balanced but will continue to monitor inflation developments closely.
As anticipated, @federalreserve Powell avoided any direct forecasts about rate hikes in prepared remarks. Below is key outlook comments...and there's not much there.
— Guy LeBas (@lebas_janney) February 27, 2018
Q&A might be interesting. Maybe. pic.twitter.com/qZK4aYTk6z
You don’t hear the words ‘poor old Rupert Murdoch’ very often (not since he almost got a pie in the face in 2011, maybe). But our financial editor, Nils Pratley, has summoned up a smidgen of sympathy....
Nils writes:
Poor old Rupert Murdoch. A media titan can’t even break up his own empire these days without gate-crashers turning up to spoil the show. Comcast’s £22bn bid for Sky is bold, aggressive and cutely-timed – qualities associated with Murdoch in his pomp – and, very probably, marks the start of a shoot-out for the UK satellite broadcaster.
The open question is who will to go head-to-head with Comcast. Should it be Murdoch’s 21st Century Fox, whose current £10.75-a-share cash offer for Sky has been trumped by 16% by Comcast? Or should Disney, in the process of trying to buy the bulk of Fox via a deal that includes the 39% stake in Sky, take matters in its own hands and make a direct counter-offer?
Therein lies the cleverness of Comcast’s timing. Brian Roberts, chairman and chief executive, has a decent chance of exploiting confusion in the opposition camps. Does Fox, given the importance of the Disney deal, have a completely free hand to raise debt and get into a bidding war for Sky? And does Disney, whatever it says about Sky being a “crown jewel”, really regard the UK TV company as fundamental to its wider purchase of Fox assets in the US?.
The very worst outcome for Murdoch would be to lose to Comcast in the battle for Sky and then see his Disney deal scuppered by US regulators, which is still a possibility......
More here:
Shares in Comcast are down 2% in pre-market trading in New York, following its proposal to acquire Sky in an all-cash deal.
Disney shares are also down, around 1%.
Wall Street trading begins in 90 minutes....
Sky: Shareholders should take no action
Newsflash: Sky has issued a statement to the City, urging investors not to take any action following Comcast’s offer to pay £12.50 per share for the broadcaster.
Here’s the full statement:
The Independent Committee of Sky notes today’s announcement from Comcast regarding a possible all cash offer for Sky at £12.50 per share (the “Possible Offer”).
The Independent Directors of Sky are mindful of their fiduciary duties and their obligations under the UK Takeover Code.
Since no firm offer has been made at this point, shareholders are advised to take no action.
A further announcement will be made as and when appropriate.
Another hedge fund, Polygon Global Partners, has predicted a bidding war for Sky - echoing Crispin Odey’s forecast.
Polygon portfolio manager Bechara Nasr has told Reuters that Sky could eventually fetch an offer of more than £15 per share (it’s still hovering around £13.30).
These hedgies aren’t impartial, of course. Odey Asset Management own 0.9% of Sky’s shares, and Polygon has also held a small stake.
Sky shares trading well above Comcast's £12.50 offer as investors bet on a counter-bid, from either Fox or Disney. Hedge funds Polygon and Odey say they believe a higher offer is coming https://t.co/bLf6Y48tX7
— Ben Martin (@Benjaminwmartin) February 27, 2018
Updated
It’s not even noon yet, but here’s the Evening Standard’s take on Comcast’s dramatic entry into the Sky takeover story:
Evening Standard biz page. Odey and other shareholders rejoice at Comcast bid for Sky. Russ on fatcat factory Persimmon's too-late sweetener. Me on how the FCA did the right thing by helping Provident survive it's scandals: Someone has to bank the poor. pic.twitter.com/3gmwA06sWt
— Jim Armitage (@ArmitageJim) February 27, 2018
Here’s my colleague Mark Sweney on today’s Comcast bid:
Comcast is attempting to gatecrash Rupert Murdoch’s takeover of Sky, submitting a rival offer to the UK broadcaster’s shareholders worth about £22bn.
The media and telecoms company, which owns NBC Universal and is the largest cable operator in the US, said its all-cash offer of £12.50 per share offered Sky shareholders a 16% premium on the offer from Murdoch’s 21st Century Fox.
Fox owns 39% of Sky and submitted its bid to take full control in December 2016, but the deal has been held up by regulatory issues.
Comcast has reportedly been exploring a bid for 21st Century Fox’s entertainment assets, which include Sky and the 20th Century Fox film studio, since the company agreed a $66bn (£47bn) sale to US rival Disney.
The company, which has 1,300 employees in the UK in broadcasting and film and TV production including the firm behind Downton Abbey, promised that Sky’s headquarters would remain at Osterley in south-west London.
“Comcast intends to use Sky as a platform for growth in Europe. We already have a strong presence in London through our NBC Universal international operations, and we intend to maintain Sky’s UK headquarters,” said the Comcast chairman and chief executive, Brian Roberts.
“Adding Sky to the Comcast family of businesses will increase our international revenues from 9% to 25% of company revenues.
More here:
Analysts: Disney could now bid for Sky
Analysts at investment bank Jefferies have predicted that Disney could actually launch its own bid for Sky soon.
That, they say, would resolve the danger that Disney complete its agreement to buy Murdoch’s 21st Century Fox -- but finds that Comcast snaffle Sky first.
In a note to clients, Jefferies say that Disney is very keen to acquire Sky - so could offer shareholders a higher price than Comcast:
FOX could in principle elect to accept Comcast’s offer. In that event, Comcast has reserved the right to switch from a simple takeover offer (requiring 50% plus 1 share acceptance) to a Scheme of Arrangement (requiring 75% approval of all Sky shareholders, including Murdoch Family Trust as they are not setting up this Scheme).
More likely is that FOX will raise its offer well above £12.50, in our view. This would give unaffiliated Sky shareholders an incentive to hold out and see if CMA approval of FOX-Sky is forthcoming. The problem for FOX of merely cashing in its Sky stake is not that this derails DIS-FOX (we understand that there is no exit route for DIS, or no impact on offer value, if Sky assets are sold before DIS takes charge). Instead, the issue for FOX would be that if it sold out of Sky only then to find that DIS-FOX were blocked, FOX would be left as a sub-scale collection of mainly US assets with India as the only material international exposure.
Likely DIS [Disney] response, in our view, will be to table a direct offer to Sky shareholders. DIS CEO has described Sky as the ‘crown jewel’ asset among the FOX operations he is seeking to acquire. Just as with Comcast, adding more international distribution (direct to consumer) and content production is strategic to countering Netflix, Amazon, etc. A counter-bid from DIS would avoid the regulatory complexities/delays in much the same way as the Comcast approach.
Rupert Murdoch will be furious that Comcast has gatecrashed his takeover bid for Sky, according to hedge fund chief Crispin Odey.
Odey (who was once married to Murdoch’s eldest child, Prudence), told Bloomberg:
“This is tanks on their lawn”.
Odey, I imagine, will be cock-a-hoop this morning. He’s been pushing for a higher bid for Sky, arguing that 21st Century Fox’s bid was too low.
Sky’s share price is climbing higher, as City traders lick their lips at the prospect of a bidding war.
After two hours of trading, Sky’s shares are now up 22% at £13.50, the highest since 2000 - and £1 or 8% above Comcast’s bid.
Laith Khalaf, senior analyst at financial services group Hargreaves Lansdown, says the market “clearly smells the scent of some more action before this saga draws to a close”.
‘Comcast has gazumped 21st Century Fox with a better takeover offer for Sky shareholders.
The successful conclusion of the Premiership football rights auction has moved the dial for Sky, which secured more games at a lower cost than last time around. Indeed the fact that Sky shares were already trading at 30p above Fox’s offer price tells us the market was expecting an improved offer from somewhere.
As it is, Comcast has thrown its hat into the ring and is now seeking to meet with the Sky directors to flesh out the deal. There may well be some reaction from 21st Century Fox. However, since the bid for Sky was launched, 21st Century Fox has agreed to sell many of its assets, including Sky, to Disney. It remains to be seen therefore what appetite Rupert Murdoch has to pursue Sky any further.
Reuters’ Ben Martin agrees:
Thanks to Comcast, we're about to find out how much Fox and Disney really want to own Sky. It was clear that the market expected Fox to bump its offer. Now it will need to beat Comcast's £12.50 bid if it wants to stay in the fight...
— Ben Martin (@Benjaminwmartin) February 27, 2018
European-based readers may not be totally au fait with Comcast, but it is undoubtedly a massive player.
Valued at around $184bn (or six times more than Sky), Comcast owns the NBC TV network, the Universal Pictures film studio (owner of DreamWorks, and cable firms MSNBC and CNBC, the XFINITY telecoms service, plus several theme parks.
It can trace its history back to 1963, when it began as a “single-system cable operator” in Tupelo, Mississippi. It was founded by Ralph J. Roberts, the father of current chairman and CEO Brian.
My colleague Mark Sweney has more info:
NBC Universal division has spent more than $1bn on TV and film productions in the UK over the last three years.
It owns Carnival Films, the UK production company behind Downton Abbey and The Last Kingdom; Made in Chelsea producer Monkey; and Working Title, the British film producer responsible for Four Weddings and Funeral, Baby Driver and Darkest Hour.
NBC Universal also owns cable channels including Syfy and E!.
Updated
Tom Watson, Labour’s Shadow Secretary of State for Digital, Culture, Media and Sport, has just commented on Comcast’s bid for Sky.
He argues that Comcast must pledge to fund Sky News for at least 10 years (as Rupert Murdoch pledged last week).
Watson says:
“The UK’s media plurality and Sky’s high broadcasting standards are at stake in this bidding process. All bids including this new one from Comcast must be very carefully scrutinised.
“Comcast must demonstrate its commitment to plurality by guaranteeing a properly funded Sky News for at least a decade as a key condition of the sale.”
As flagged up earlier, Comcast have already promised to “maintain Sky News’ existing brand and culture” and its track record of excellence and impartiality. There’s no time-scale on that commitment, though....
In a fantastic twist, Comcast’s chief Brian Roberts says a London taxi driver played a key role in triggering today’s bid:
Comcast boss on what persuaded him to make a £22bn bid for Sky (in FT). Who’s the cabbie? Does he get an arrangement fee? Is this total BS? pic.twitter.com/opBqkxFh3I
— Philip Aldrick (@PhilAldrick) February 27, 2018
What the readers say
Readers are split over the merits of Comcast’s offer for Sky. Here’s some reaction from below the line...
One reason we have lost, complete, control of our democracy is because of the lax attitudes we have taken towards our Media ownership, which has led to the foreign influence of our Media hence Brexit. Fox and his Brexiteer chums will welcome Comcast, that is what they are all about! Take back control and give it away to the United States!
Oh... and if Comcast could send an engineer round to Cobberthedog’s patch, we’d be most grateful....
Personally, I'm still waiting for Comcast to fix my high speed internet if anyone in customer support is following this in upstate New York.
Neil Campling of Mirabaud Securities says it makes a lot of sense for Comcast to acquire Sky:
There is the attraction of diversifying away from the U.S. because of pressures on the cable industry there. The regular annuity stream that you have from the subscription business of Sky will be of primary appeal to Comcast.
“The strategic fit of Sky for Comcast makes sense. Comcast has grown to become the number 1 cable company in the US so the company has a strong background in Pay-TV. Also Comcast has a large international operation through content of its NBCU assets and has previously stated interest in expanding the non-US asset base. Comcast EV (enterprise value) is $247bn so this is an easily absorbed deal.
He also believes that Comcast is acting now, because Sky has just retained rights to show Premier League football, and before the UK regulators give their approval to Fox’s bid.
Sky’s shares have hit their highest levels in almost 18 years, dating back to the end of the dot-com boom:
Let's get ready to rumble! Sky shares (now +18%) highest since July 2000 after #Comcast make $31bn bid to rival Fox - Offer represents a 16% premium over what Fox offered. pic.twitter.com/cTTVgBarBX
— Ed Ludlow (@EdLudlow) February 27, 2018
Comcast bid: the key points
If you’re just tuning in, here are the key points from Comcast’s surprise $31bn offer for Sky:
- Possible all-cash offer of £12.50 per share, premium of 16% to the current 21 Century Fox offer
- Minimum acceptance condition of 50 per cent. plus one share
- Confident in receiving all necessary regulatory approvals in a timely manner
- Strategic opportunity to acquire a leading content and distribution business in the UK and Europe
- Specific intentions to maintain a strong presence in the UK for the combined business:
- Continued investment in creative industries in the UK
- Support for high broadcasting standards and news impartiality in the UK
- The combined business will have the resources and capabilities across content, technology and service to compete and grow in a rapidly changing market
- Accretive to Comcast’s free cash flow per share in year one
Updated
Interactive investor: Sky takeover battle will be compulsive viewing
Richard Hunter, Head of Markets at interactive investor, says that Comcast’s proposed offer for Sky is a “fascinating development”, on many levels.
The deal would have attractions on a number of fronts, not least of which would be the removal of complexity from the current tripartite discussions between Fox, Disney and Sky. In a land where, increasingly, content is king, there would be synergies from a creative programming perspective, whilst the potential showstopper of media plurality concerns would probably not apply to the Comcast bid. Meanwhile, the combined group would have a stable of media, production and technology outlets which would position it strongly in any number of countries.
Hunter also points out that Murdoch’s 39% stake in Sky is an added complication:
In a normal takeover situation, the potential acquirer would be extremely keen to have the support of the largest shareholder in an effort to ease the deal through. Unlikely though it seems, this could yet happen, but it is equally plausible that Fox will need to return with an improved bid, which the market was beginning to anticipate in any event. Indeed, the initial share price reaction suggests that this story has further to run, with Sky’s price leaping above the level of the already increased Comcast offer.
Whatever the outcome, Comcast has put the cat amongst the pigeons with a move which should make for compulsive viewing.”
Here’s more reaction to the Comcast deal, first from journalist Robin Powell:
My former colleagues at Sky News will be relieved to hear that Comcast is committed to keeping it. Excellent though it is, any loss-making service is bound to be concerned about a proposed takeover https://t.co/vUM2N3PTCD
— Robin Powell (@RobinJPowell) February 27, 2018
City veteran David Buik says the ball is firmly in 21st Century Fox’s court - will Murdoch boost his own bid, or accept Comcast’s offer?
CORE SPREADS - COMCAST'S bid for SKY triggers a huge surge in share price of Sky above bid price of 1250p - up 18.4% to 1308.75. Over to 21st Century what am I bid or do you fold? #risk
— David Buik (@truemagic68) February 27, 2018
CNBC’s Geoff Cutmore flags up that we could get a full-blown bidding war for Sky
Key line in #Comcast offer for #Sky. 'The Premier League auction result was a factor....' in the bid. Alex de Groote #media analyst Cenkos Securities says that makes Sky very attractive to any bidder, and we could see a bidding war!
— Geoff Cutmore (@GeoffCutmore) February 27, 2018
Sky shares jump 18%
Boom! Shares in Sky have jumped by 18% at the start of trading.
They have surged to £13.10, up from £11.05 last night.
That actually values Sky at more than Comcast’s new proposal (£12.50 per share), suggesting that the City believes Murdoch may have to increase his own offer (£10.75).
Sky shares 13 quid...smelling an upped $DIS bid. 50p premium to what Comcast have put on the table...
— Chris Bailey (@Financial_Orbit) February 27, 2018
Updated
Some quotes from Comcast are flashing up on my Reuters terminal now.
Chairman and CEO Brian Roberts are saying that there are “strong strategic benefits” in combining its assets with Sky.
The company didn’t speak to Sky until this morning, and hasn’t had any contact with the Murdoch family since Fox announced its deal to sell assets to Disney.
Roberts also says Comcast is prepared to be co-owners of Sky with either 21st Century Fox, or Disney. [That could happen, if Comcast buy the 61% of Sky which 21C Fox doesn’t own, and Disney completes the existing deal to buy Fox].
Updated
Sky’s shares are likely to surge when trading begins on the London stock market in 10 minutes.
They closed at £11.05 last night - ahead of 21st Century Fox’s offer (£10.75), but well short of Comcast’s offer of £12.50.
Comcast looks to buy Sky: Instant reaction
The news that Comcast could take control of Sky is sending shockwaves through the media sector.
The FT’s Arash Massoudi agrees that it could disrupt Rupert Murdoch’s bid, and even scupper his grand plan to sell much of his Fox empire to Disney:
Breaking: Comcast, the US cable giant and owner of NBC, has bid £22.1bn for Sky, the UK/European Pay TV Group, outbidding Rupert Murdoch's 21st Century Fox and throwing a wrench into the mega Disney/Fox deal pic.twitter.com/eIMJ1a0Ujw
— Arash Massoudi (@ArashMassoudi) February 27, 2018
City analyst Louise Cooper says the deal has been triggered by pressure from new media. She suspects Comcast will have to fight hard to get the deal over the line.
My quick take on Comcast Sky.
— Louise Cooper (@Louiseaileen70) February 27, 2018
2 old media businesses together. Cost cutting potential, possible synergies. But fundamentally not change problems of dealing with new generation that doesn’t watch tv.
Classic M&A from weakness.
Comcast very cleverly has gone for Murdoch’s weak spot.
— Louise Cooper (@Louiseaileen70) February 27, 2018
Media plurality and potential closure of Sky News under Disney.
But as Murdoch owns 39% Sky & is unlikely to vote against his own bid, Comcast has lot to do to persuade majority of shareholders to back its bid.
Comcast says it doesn’t expect to run into any of the ‘media plurality’ concerns that have dogged Rupert Murdoch’s attempts to buy Sky.
Today’s statement includes a section called “Supporting high broadcasting standards and news impartiality in the UK”, which states:
Comcast recognises that Sky News is an invaluable part of the UK news landscape and the Company intends to maintain Sky News’ existing brand and culture, as well as its strong track record for high-quality impartial news and adherence to broadcasting standards.
While Comcast does own a substantial international operation in the UK, with more than 1,300 employees, the Company has only a minimal presence in the UK media market. Comcast therefore does not believe that this Superior Cash Proposal should create any media plurality concerns in the UK.
Comcast is also pledging to use keep Sky’s headquarters in the UK, if its takeover bid succeeds.
Chairman and CEO Brian Roberts says:
“Comcast intends to use Sky as a platform for growth in Europe. We already have a strong presence in London through our NBCUniversal international operations, and we intend to maintain Sky’s UK headquarters.
Adding Sky to the Comcast family of businesses will increase our international revenues from 9% to 25% of Company revenues.”
Updated
Comcast launches takeover offer for Sky
NEWSFLASH: Comcast, the US cable company, has launched a takeover offer for Sky, in a challenge to Rupert Murdoch.
Comcast is offering to pay £12.50 per share in cash for the British broadcaster, valuing it at $31bn, or £22.1bn.
This is a 16% premium to the existing takeover bid from 21st Century Fox (£10.75 per share).
Brian Roberts, Comcast chief executive, says “We think Sky is an outstanding company”, adding:
“It has 23m customers, leading positions in the UK, Italy and Germany, and is a consistent innovator in its use of technology to deliver its customers a great experience.”
That bid has been caught up in regulatory concerns -- last month, the Competition and Markets Authority ruled that it was not in the public interest for Fox to buy the 61% of Sky it doesn’t own, due to media plurality concerns.
There’s an additional complication -- since bidding for Sky, Murdoch has agreed a deal to sell much of Fox’s assets to Disney.
More to follow....
Updated
The agenda: Fed chair Jerome Powell goes to Congress
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
It’s Jerome Powell’s big day. The world’s most powerful central banker testifies to Congress, for the first time since replacing Janet Yellen as head of the Federal Reserve.
Investors around the world will be watching closely, for hints about how quickly the Fed might raise interest rates if inflation picks up. Worries about rising borrowing costs caused the markets to plunge at the start of this month; traders will be worried about a repeat.
Jasper Lawler of London Capital Group says:
Although yields have fallen away from their recent 4 year high, there is still a level of caution among investors over the future of the US economy and monetary policy, which is keeping the market on edge.
Therefore, it comes as no surprise that the most relevant event today will be new Federal Reserve Chair Jerome Powell’s appearance before Congress, in the Semi-annual Monetary Policy Report. This is his first official testimony in a highly anticipated event.
However, given the backdrop of interest rate expectation sensitivity, which caused significant market disruption, Powell is unlikely to want to rock the boat.
We also get new economic data from the eurozone, including the first estimate of inflation in Germany.
The agenda
- 10am GMT: Eurozone consumer confidence figures
- 1pm GMT: German inflation figures
- 1.30pm GMT: Jerome Powell’s testimony to the House Banking Committee is released
- 3pm GMT: Powell’s session before the House Banking Committee begins
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Intriguing. Brian Roberts is much, much preferable to The Digger. This may actually introduce more plurality to the UK media market, not less. Anything that loses Murdoch's grip on media in the UK is good in my book.