Morningstar | Fox Will Tender its Sky Stake to Comcast; Disney Can Focus on Integrating Fox Assets
Fox announced on Sept. 26 that it will sell its 39% share in Sky to Comcast under the cable company's GBX 1,728 tender offer for Sky shares. The tender will move Comcast's stake in the company to well over the 50% goal and will likely force other shareholders to sell as well. Disney will use the additional proceeds from the sale to lower the debt load needed to acquire the Fox assets. Disney is in the process of closing its acquisition of the Fox assets which would have included the 39% stake in Sky. While Disney’s management was positive about Sky’s assets during the bidding process, we believe that Disney dodged a bullet by not matching the Comcast offer as Sky still generates a large percentage of its revenue from a declining satellite business. We are maintaining our wide moat ratings for Disney, Fox, and Comcast and fair value estimates of $130, $46, and $42, respectively.While the price of Sky was not explicitly broken out, we assume that Disney roughly valued the shares at Fox's bid of GBX 1,400 at the time that Comcast dropped out of the fight for the Fox assets. This implies over 20% above an already inflated bid since Disney likely originally valued the stake at the first Fox bid of GPX 1,075. The sale of 39% of Sky along with the forced sale by FCC of the Fox regional sports will decrease the debt load required to complete the Fox assets purchase and should allow Disney’s management to focus on integrating the Fox assets into its direct to consumer efforts, specifically the launch of the Disney branded SVOD in the second half of 2019.
Twenty-First Century Fox is a media and entertainment company with operations in the following segments: Cable Network Programming, which consists of the production and licensing of programming distributed primarily through cable television systems and others; Television, which consists of the broadcasting of network programming and the operation of power broadcast television stations; Filmed Entertainment, which consists of the production and acquisition of live-action and animated motion pictures for distribution and licensing in all formats in all entertainment media worldwide, and the production and licensing of television programming worldwide; and Other, Corporate and Eliminations.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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