Comcast Corp. (NASDAQ: CMCSA) outbid Twenty-First Century Fox Inc. (NASDAQ: FOXA) to acquire European broadcaster Sky.
Comcast outbid Fox on Saturday with a USD 39 Billion takeover offer in a rare three-round auction that pitted two of America’s largest media companies against one another. Earlier on Monday, Sky advised its shareholders to accept the offer “immediately.”
As the winner in a fierce bidding war, Comcast is poised to almost double its customers. The acquisition would also help Comcast further hedge its bets in a fast-changing business, believing the key to competing with Netflix is to straddle both sides of the business and the Atlantic Ocean.
Craig Moffett, an analyst at MoffettNathanson LLC, downgraded Comcast’s stock Monday to neutral, saying the Company had “grossly overpaid for Sky.” Timothy Horan, an analyst at Oppenheimer, also downgraded Comcast’s stock, citing the Company’s need to invest instead in the U.S., where it faces growing competition from wireless and online TV rivals.
The debt Comcast will take on to complete the deal isn’t a concern but the price tag is a worry, Moffett said. The bidding war between Disney and Comcast pushed Sky’s valuation from eight times earnings before interest, taxes, depreciation and amortization to 15 times, he said.
“It’s going to be incredibly hard to justify having paid such a high price,” Moffett said in an interview Sunday. “This is an asset that neither Disney nor Comcast investors wanted to win.”