Introduction
Comcast (CMCSA) is causing headaches for Disney (DIS) and Fox (FOX), having initially tried to counter the Disney offer for key entertainment assets held by Fox [inclusive of Sky (SKY)] and now making a play for Sky alone. Whilst there is certainly strong rationale for this given the importance of owning high-quality content, the seemingly inflated offer price has drawn the ire of the market and resulted in a sell-off in Comcast shares. This, in my opinion, has presented an opportunity for contrarian investors looking for a bargain asset.
Background
Whilst, I think Sky is a solid asset with good content and market share in developed market economies, it is not an asset with highly attractive growth prospects. The effective ~12.2x EV/EBITDA multiple offered for the business is in my view at least 2 turns too high. Having said that, the transaction has not been accepted, and we may yet see a counter-offer from Fox, which should (hopefully) put an end to Comcast's interest.
