On his trip to London, Comcast’s CEO Brian Roberts took a cab to his hotel. On the way, the chatty cab driver persuaded him the merits of Sky –
Comcast is giant of a media company in the US but virtually unknown outside. They have been looking to increase their footprint in Europe.
Incidentally, Sky was also for sale. With 27 million monthly paying subscribers across Europe, strong strategic alliances with companies like BT Sport, Netflix, Spotify and lucrative broadcasting rights to popular sports, Sky offered just the ticket for fulfilling Comcast’s ambitions.
The question was – how much to pay for the Sky?
It is especially pertinent as the heavily indebted Sky was almost written off not long ago as digital competitors like Netflix, Amazon Prime started to encroach the territory it considered its own. To make matters worse, EE owned BT has outbid Sky to broadcast many football matches, breaking Sky’s monopoly of over 20 years.
In the end, Comcast paid £37bn (representing 15x EBITDA) – a 124 percent premium over the company’s enterprise value before the bidding started.
Comcast’s logic seems strategic – to become a relevant and major player, they had to own content. Besides, companies like Sky don’t come up for sale often. Still, when compared with peers, that’s an extraordinary price to pay – even for Sky.
In the end, Sky emerges as a winner. In 2014, AT&T offered 7.7x EBITDA to buy the company. Sky’s management has done a tremendous job of painting the story of its potential for driving the price to this level. And they timed it perfect to the minute as the cash-rich competitors like Amazon, Facebook and Google are starting to sniff around for the same content.
No wonder, Comcast’s share price also dropped 8% soon after the d
