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Stock in Comcast was down $2.82, or 7.2 percent, to $35.08 in mid-morning trading on the NASDAQ Exchange over worries that too great a premium was paid for Sky, or that Comcast needs to protect its domestic cable business from cord-cutting and other digital disruptions, rather than expand into Europe.
Comcast on Saturday won with a higher $22.60 per-share bid for Sky during a three-round auction showdown that values Sky at £29.7 billion ($38.8 billion), against Fox/Disney offering a final $20.50 per-share offer.
“We expect [Comcast] to use Sky’s OTT platforms itself and see good cross-selling; however, Comcast needs to invest in U.S. wireless/OTT capabilities and ultimately consolidate the U.S. cable industry to protect its franchise here,” Oppenheimer analyst Timothy Horan wrote in a morning note after handing Comcast a stock downgrade.
Craig Moffett and Michael Nathanson at research firm MoffettNathanson in their own investment note said Sky may become an “albatross” for Comcast as the UK company remains a satellite TV provider, “and satellite video distribution is increasingly becoming obsolete.”
Disney, by contrast, having lost the auction to Comcast, is judged a winner by market watchers.
Bernstein analyst Todd Juenger in a note argued Disney “dodges a bullet” and Comcast has paid a steep $21.1 billion premium over the pre-bid value of Sky. “Rather than pay such a premium, Disney can now get paid that premium (assuming Fox agrees to sell, and deliver the proceeds to Disney in lieu of the shares they had promised,” Juenger wrote.
Disney can also bargain around Comcast’s 30 percent stake in Hulu after 21st Century Fox on Saturday said it “is considering its options regarding its own 39 percent shareholding in Sky” after it was outbid for the European pay TV giant.
Moffett and Nathanson also see Disney winning by losing the auction. “Assuming that Comcast buys the 39 percent stake from Fox, the high price paid by Comcast for Sky will improve the metrics of the Disney-Fox transaction,” Moffett Nathanson wrote in its note.
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