Sky shareholder Odey Asset Management believes bidders could easily afford to offer GBP 18 per share
22 JUN 2018
Sky [LON:SKY] shareholder Odey Asset Management has said it believes bidders for the FTSE-100 satellite group could comfortably afford to offer GBP 18 (EUR 20.55) per share, The Times reported.
The newspaper quoted Odey founder and fund manager Crispin Odey, who said his firm’s research indicates that Sky’s finances will improve soon, prompting bidders to table higher offers.
Comcast [NASDAQ:CMSA], a Philadelphia, Pennsylvania-based cable TV company, has offered GBP 12.50 per share for Sky, a valuation of GBP 22bn.
Twenty-First Century Fox [NASDAQ:FOX], the New York City-based media group that holds a 39% stake in Sky, has offered GBP 10.75 per share for the 61% it does not already own. Sky’s board has withdrawn its recommendation for Fox’s offer.
As reported, Fox is looking to acquire full ownership of Sky before selling the business, alongside its other entertainment assets, to The Walt Disney Company [NYSE:DIS]. Comcast is also bidding against Disney for the other Fox entertainment assets.
Odey, whose fund holds a 0.9% stake in Sky, has estimated that the business is worth GBP 18.00 to GBP 26.00 per share, the item said. Odey argued that as debt is currently cheap, bidders could easily afford to offer GBP 18.00. The report mentioned a potential bid value of GBP 50bn, but did not attribute the figure to a source.
Odey said Sky’s previous investment in programming will lead to improved sales, which could increase free cash flow to GBP 2.5bn, up from GBP 1.6bn now. The GBP 2.5bn free cash flow would value the target company at nearer to GBP 26.00 per share, Odey estimated.
One analyst cited by the report said Disney’s offer for Fox’s assets carries less regulatory risk than Comcast’s offer, while Disney’s offer would be more attractive for Fox’s controlling shareholders the Murdoch family for tax reasons, as its offer is in cash and shares while Comcast’s bid is cash-only.
Another analyst cited by the report doubted that bidders would be unlikely to pitch offers higher than 10% above Comcast’s bid. A 10% premium to Comcast’s offer would value Sky at GBP 13.75 per share, the analyst said, noting that the company’s shares are already trading at about that level.
The Times is published by News Corp [NASDAQ:NWSA], whose chairman Rupert Murdoch is co-chair of Fox alongside his son Lachlan Murdoch. Murdoch’s other son, James, is Fox’s CEO and chairman of Sky.
Sky’s share price closed GBP 0.25 up at GBP 14.05 in London on Thursday, giving the company a market capitalization of GBP 24.15bn.
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