Roberts: Sky Was ‘Mispriced’

Comcast chief says market didn’t recognize full value, potential of satellite giant
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Brian Roberts, Comcast ONE-TIME USE ONLY

While some analysts scratched their heads in September after Comcast agreed to pay nearly $40 billion for Sky plc, the cable company’s chairman and CEO Brian Roberts said he still believes the British satellite giant was grossly underpriced by the market.

Comcast won the war for Sky on Sept. 22, besting Disney and 21 Century Fox’s bid by about 10%. Comcast’s final bid of £17.28 ($22.55) per share for Sky represented a 38% premium to the initial offer the cable company made for the satellite giant in February. Comcast also agreed to buy Fox’s 39% interest in the satellite giant or the same price, adding about $15 billion to the final bill. 

On a conference call with analysts Thursday, Roberts addressed the pricing issue head-on, telling analysts that for several reasons -- including regulatory concerns, its dominant owner (Fox) and M&A fluctuations – the market didn’t place the proper value on Sky. And besides, the 10% premium Comcast paid was equal to the gap between  The Walt Disney Co.'s final bid for Fox programming and production assets and Comcast's offer for the same properties. Comcast dropped out of the running for those properties in July, in part to focus more on its Sky efforts. 

“I do think it was mispriced,” Roberts said of Sky's earlier valuation on the call, adding that in addition to the other pressures, there has been a fundamental change in the programming and distribution market in terms of sports rights, competitiveness and new opportunities. “Then I look at the fact that Disney bid 10% less, that is exactly the amount we bid less than they did on Fox. These are super desirable assets when put together with a company like Comcast. The fit makes us stronger. First, as a standalone it supports the values. Together, I think it increases the value. Time will tell.”

The Sky purchase will boost Comcast’s total customer footprint to more than 50 million homes globally, a scale that Roberts said could be used to drive cost synergies and savings across the board, including in programming negotiations.

“Opportunities for better scale? Absolutely,” Roberts said. “That is a big motivator of what will reveal itself for years and years to come. …We’ve always believed that scale mattered, that’s why our results at Comcast cable were so stellar, it’s why NBC Universal has been able to grow as much as it has. I think Sky is a leader in its market. When you’re doing something in a new market, you’d like to be the best.”

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