Comcast formalizes bid for Sky in challenge to Rupert Murdoch’s Fox

Comcast Corp. has formalized its $30.7-billion bid for Sky Plc, throwing down the gauntlet to Rupert Murdoch’s 21st Century Fox Inc. and Walt Disney Co. as they vie for Britain’s largest pay-TV broadcaster.

Sky’s independent board members welcomed the offer and said they’re withdrawing their recommendation that shareholders accept the Fox proposal. Comcast is offering 12.50 pounds ($17.43) a share in an all-cash deal, the Philadelphia-based company said in a statement Wednesday, confirming a proposed offer it made on Feb. 27. The offer is 16% above Fox’s 10.75 pound-per-share bid for Sky.

Media billionaire Murdoch must now decide whether to increase Fox’s bid to stave off Comcast’s challenge, raising the prospect of a bidding war. Fox, which already has a 39% stake in Sky, plans to sell the broadcaster to Disney as part of their $52.4-billion merger announced in December.

In a separate statement, Fox said it remains committed to buying Sky and is “considering its options.” Murdoch’s company also faces the uncertainty of a British regulatory review that has delayed the Sky purchase, which was first announced in December 2016.

Sky’s shares rose 3.6% to 13.55 pounds ($18.89) at 11:56 a.m. in London. Since Comcast announced its proposed bid, Sky’s stock had been trading at more than 13 pounds, above the Comcast price, as investors expected a protracted battle for the broadcaster.

“This might elicit the bidding war,” said Alex DeGroote, a media analyst at Cenkos Securities. “We now have a formal proposition, instead of just a suggestion. Sky at these levels is a free bet on the upside.”

Comcast said it expects the Sky deal to generate annual run-rate synergies of around $500 million, through a combination of revenue benefits and recurring cost savings.

“We have long believed Sky is an outstanding company and a great fit with Comcast,” CEO Brian Roberts said in the statement. “We very much hope that the independent committee of Sky directors will recommend our superior cash offer.”

Comcast also on Wednesday released first-quarter earnings, which surpassed Wall Street’s expectations. For January through March, the company earned $3.1 billion, or 66 cents a share, compared to $2.6 billion, or 53 cents, in the year-earlier period. Revenue increased nearly 11% to $22.8 billion.

Growth was fueled by the addition of high-speed internet subscribers and strong results at the company’s NBCUniversal media unit, which saw revenue soar 21% to nearly $9.5 billion.

NBC’s broadcast of the Super Bowl and the Pyeongchang Olympics generated a combined $1.6 billion in revenue. Nearly three-quarters of that came from the Olympics, with the Super Bowl contributing $423 million. Ad revenue increased 85% at the peacock network on the strength of the sports slate.

NBCUniversal’s cable channels, including USA and NBC Sports, also televised the contests from South Korea. The cable channel group was helped with a nearly 20% increase in advertising revenue.

Revenue tumbled 16.3% at Universal Pictures film studio in Los Angeles to $1.6 billion because of fewer hits at the box office. Universal Studios theme parks, however, turned in another impressive quarter with revenue up 14.5% to $1.3 billion as visitors continued to flock to such attractions as “The Wizarding World of Harry Potter” at the Los Angeles park.

The quarter also benefited from the timing of spring break holidays.

Times staff writer Meg James contributed to this report.

UPDATES:

12:55 p.m.: This article was updated with information about Comcast earnings.

This article was originally published at 4:20 a.m.