Rupert Murdoch's 21st Century Fox has decided to sell its 39 percent stake in Sky Plc to Comcast Corp. after the cable company won a hard-fought bidding war for the European pay-TV giant.
Fox's stake is worth about $15 billion under the terms of the deal, the company said Wednesday.
The decision was expected. Fox's soon-to-be owner, Walt Disney Co., had wanted to own all of the satellite TV service, which boasts 23 million customers in five European countries. But Philadelphia-based Comcast, led by Chairman and Chief Executive Brian Roberts, prevailed in a rare auction Saturday by offering nearly $40 billion for the entirety of Sky.
Fox's sale of the Sky stake will substantially reduce the amount of debt Burbank-based Disney is taking on in order to complete its purchase of Fox, the company said.
This year, Disney won control of Fox in another bidding battle with Comcast by offering $71.3 billion for much of Murdoch's media empire, including Fox's Century City-based film and TV studio and cable networks such as FX. Shareholders approved the transaction in July.
To gain regulatory approval, Disney agreed to sell Fox's 22 regional sports networks.
By selling the minority Sky stake and the regional sports networks, Disney is expected to reduce its acquisition costs by roughly $30 billion, according to a person familiar with the matter who was not authorized to comment.
That should give the entertainment behemoth more freedom to invest in CEO Robert Iger's ambitious streaming video strategy, meant to help Disney compete with tech insurgents such as Netflix. Disney is expected to launch a direct-to-consumer video service in 2019 that will include original content from its key brands, including Marvel and "Star Wars."
Another major part of Disney's streaming strategy is Hulu, which it will control as a result of the acquisition. Disney will own 60 percent of the streaming service after the deal closes, which is expected to happen in 2019. Comcast owns 30 percent of Hulu, and AT&T's WarnerMedia holds the remaining 10 percent. It is still unclear what Comcast will do with its Hulu stake; many analysts expect it will sell the stake to Disney.
Disney's stock rose 1.9 percent to $115.78 a share as of 9:18 a.m. PDT. Comcast shares were little changed at $35.49.
"We don't think missing out on Sky is a major blow to Disney's ... strategy, as Disney already has high quality content, the ability to create more high quality content, and the ability to launch premium (over-the-top) products globally," Cowen & Co. media analyst Doug Creutz said in a research note to clients.
Murdoch co-founded the satellite TV service in 1989 to compete with the venerable British Broadcasting Corp. Fox started gearing up to buy the remaining stake in the pay-TV company two years ago to fortify its base in Britain, but was bogged down by regulators. Fox had previously attempted to buy all of Sky but was forced to retreat in 2011 amid an embarrassing cellphone hacking scandal at its now-defunct London tabloid, News of the World.
