Comcast Corp. won its hard-fought prize in a rare London auction over the weekend _ submitting the winning bid of $40 billion for the European pay-TV company Sky _ but the hangover hit Monday.
The Philadelphia cable television giant suffered its worst morning on Wall Street in nearly a decade _ its shares tumbled nearly 7 percent to about $35 _ as investors reacted by concluding that Comcast dramatically overpaid for London-based Sky.
Meanwhile, shares of Walt Disney Co. _ which lost the auction _ climbed nearly 2 percent to more than $112.
"Disney dodges a bullet (and then some) as Comcast pays a huge premium for Sky," Bernstein & Co. media analyst Todd Juenger wrote in a morning report. "This weekend's outcome of the bidding war for Sky was, in our view, the best possible result for Disney. We never understood why Disney would want to operate a European (satellite TV) business."
Comcast's Chief Executive Brian Roberts badly wanted to add Sky to his portfolio because Comcast has struggled to build an international profile. Gobbling up Sky _ even at a huge premium _ will immediately give Comcast a reach into more than 23-million homes in some of Europe's most prosperous countries: Britain, Ireland, Germany, Austria and Italy.
The sealed bidding process, a requirement of Britain's regulatory Takeover Panel, which conducted Saturday's auction, contributed to the sky-high bids. Comcast feared losing the prize after 21st Century Fox, which was bidding on behalf of Disney, twice raised its offer since Comcast jumped into the Sky bidding earlier this year.
On Saturday, the Fox-Disney team increased its offer for Sky in the auction's first round. Then Comcast raised its bid in the second round. Both companies submitted sealed bids in the sudden-death round _ so Comcast bet big and ended up paying $8 billion more than its initial bid for Sky back in February. At that time, Sky's market value was under $20 billion.
Britain's Takeover Panel presided over Saturday's auction, marking the first time in a decade that the London-based regulatory body conducted a corporate auction. Sky's independent board members quickly approved Comcast's winning bid of $22.75 a share. Rupert Murdoch's Fox, which handled the bidding for Disney, offered about $35 billion _ or $20.63 a share.
