Sky Plc’s twilight days as a public company are turning into its glory days. The British pay-TV group has just pulled off the impressive feat of paying less to screen more matches in Britain’s top soccer league. That, and the evidence this provides of Sky’s management skill, makes it considerably more valuable to its various suitors.
The auction for Premier League soccer rights is ongoing but it’s already clear Sky has done far better from it than many observers expected. Its overall spend per season will fall by 199 million pounds to about 1.2 billion pounds ($1.7 billion). Still a big number, but a pretty stellar performance in the hyper-inflationary world of top-end sports rights -- and one that shows the shine might be coming off the Premier League bandwagon after decades of untrammeled success.
Fears of a crippling bidding war between Sky, BT Plc and the U.S. tech giants have proved unfounded, although it remains possible that a U.S. firm might snap up one or both of the last two of the seven packages being sold.
Sky has shown it understands the value of these rights both to itself and to its rivals. Its main competitor, BT, was saying it was happy to be a number two player in British sports broadcasting. The U.K. telecoms group couldn’t say anything else. Its shares are at levels last seen in 2012. Reviving its fortunes does not turn on English football’s pampered stars. The two companies signed a content sharing deal in December, learning that cooperation often beats competition.
Meanwhile, there was no point trying to outbid an imaginary offer from Amazon.com Inc.
Sky’s shareholders were quick to pressure its independent directors into accepting a takeover offer from lead shareholder Twenty-First Century Fox Inc. back in December 2016, fearing the impact of Brexit on U.K. consumer spending and a dire outcome from this auction.
That offer still depends on the U.K. Competition & Markets Authority’s willingness to accept Fox’s proposed remedies to let a deal proceed, and on a Sky shareholder vote. The price to which Sky shares might fall in the absence of a deal has now lessened in light of the soccer win.
Sky shares were trading at 7.90 pounds before the Fox bid. Unless its shareholders really believe that is the standalone value today, the 36 percent premium in the 10.75 pounds a share offer has just been slashed.
Fox is itself subject to an offer for most of its assets from Walt Disney Company. But completion of that deal is uncertain and distant. Fox now has extra reasons to give the CMA the assurances it needs to get the Sky deal done. And Sky’s shareholders have every reason to fight for a better price.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
Chris Hughes is a Bloomberg Gadfly columnist covering deals. He previously worked for Reuters Breakingviews, as well as the Financial Times and the Independent newspaper.
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