CNBC is reporting that Fox will be selling their stake in Sky, the European broadcaster, to Comcast. Fox owns 39% of the company and was seeking to buy the part they did not own, but were substantially outbid by Comcast. This means Disney will get approximately a $15 billion credit towards their $71.3 billion purchase of 21st Century Fox.
While it has often been theorized that Fox would sell their stake in Sky in exchange for Comcast to sell their stake in Hulu, UK regulations prohibit that sort of tit-for-tat transaction. That being said, it is possible, that Comcast will still sell their stake. In fact, that deal could close prior to the 21st Century Fox acquisition being completed.
Disney had looked at Sky as a way to expand their international footprint. In fact, Disney restructured to include a “Direct-to-Consumer and International” division which seemed designed to be able to ingest Sky into the Disney organization. It is unknown how this development will impact Disney’s international growth plans.
Official Statement from Disney:
The Walt Disney Company has consented to Twenty-First Century Fox, Inc.’s decision to tender or sell its 39% stake in Sky plc as soon as allowable under terms of Comcast Corp.’s £17.28 per share offer for Sky. The current value of Fox’s Sky stake is more than $15 billion.
The transaction, coupled with the divestiture of the Fox Sports Regional Networks, will significantly reduce the amount of debt Disney will incur in acquiring 21st Century Fox, and enable Disney to maintain its strong balance sheet as it continues to invest in content creation for its direct-to-consumer platforms. Disney will expand its considerable investment in the Disney-branded direct-to-consumer offering launching in late 2019 and the new ESPN+ sports streaming service, and will seek to increase investment in Hulu’s content offerings and international distribution. Disney and 21st Century Fox each currently hold 30% stakes in Hulu.
“Along with the net proceeds from the divestiture of the RSNs, the sale of Fox’s Sky holdings will substantially reduce the cost of our overall acquisition and allow us to aggressively invest in building and creating high-quality content for our direct-to-consumer platforms to meet the growing demands of viewers,” said Robert A. Iger, Chairman and Chief Executive Officer, The Walt Disney Company.
The acquisition has received formal approval from shareholders of both companies, and Disney and 21st Century Fox have entered into a consent decree with the U.S. Department of Justice that allows the acquisition to proceed, while requiring the sale of the Fox Sports Regional Networks. The transaction is subject to a number of non-U.S. merger and other regulatory reviews.