Twenty-First Century Fox Inc. (FOXA, Financial)(FOX, Financial), a major Seth Klarman (Trades, Portfolio) holding, announced on Wednesday it intends to sell its 39% stake in U.K.-based Sky PLC (LSE:SKY, Financial) to Comcast Corp. (CMCSA, Financial), an action parent company Walt Disney Co. (DIS, Financial) consented to.
On Monday, Comcast announced a superior offer of 17.28 pounds ($22.77) per Sky share, implying a value of approximately $40 billion. The new offer represents a 2.53-pound increase from the prior offer announced on July 11.
Fox congratulates Comcast on Sky deal
Fox congratulated Comcast on its acquisition of Sky in a press release statement, saying the U.K.-based broadcaster represents a “world-class example of a customer-driven enterprise.” The New York-based entertainment company has created a business that not only produced excellent shareholder returns but also delivered strong value for families in Europe.
GuruFocus ranks Sky’s profitability 8 out of 10 on several factors, including a return on equity that outperforms 78% of global competitors. Additionally, Sky’s revenue has increased approximately 10.4% over the past three years despite decelerating over the trailing 12 months.
Transaction alleviates Disney’s debt issue
Disney consented to Fox’s transaction, citing the potential for lower acquisition costs and the amount of net debt incurred. CEO Bob Iger added the transaction allows the Burbank, California-based company to “aggressively invest in building and creating high-quality content for [Disney’s] direct-to-consumer platforms,” which include Hulu and ESPN+.
GuruFocus ranks Disney’s financial strength 6 out of 10: although the company has strong interest coverage and Altman Z-scores, the company has just 18 cents in cash per $1 in debt. Despite this, Disney’s debt-to-EBITDA ratio of 1.24 is safely below Joel Tillinghast’s threshold of 4.
Gurus with large positions in Disney include Andreas Halvorsen (Trades, Portfolio), PRIMECAP Management (Trades, Portfolio) and Lee Ainslie (Trades, Portfolio).
Disclosure: no positions.
