Fox Agrees to Sell Sky Stake to Comcast; Disney to Use $15B Cash to Reduce Debt

21st Century Fox (FOXA) said Wednesday that it will sell its 39% stake in Britain's Sky plc to Comcast Corp. (CMCSA) , ending one of the longest takeover battles in U.K. history and handing control of Europe's biggest pay-TV group to America's biggest cable company.

Comcast, which topped the best-and-final offer of £15.67 from Fox and Walt Disney Co. (DIS) with a £17.28 bid that valued Sky at £30.6 billion ($40.2 billion), had purchased 36.9% of the outstanding shares over the past three days and will now have complete control of the broadcaster and its 23 million customers. Disney, which is purchasing the media assets of Fox for around $71.3 billion, said it agreed to the sale and would use proceeds from the Sky sale, which is valued at around $15 billion to pay down debt.

"Along with the net proceeds from the divestiture of the (regional sports networks), the sale of Fox's Sky holdings will substantially reduce the cost of our overall acquisition and allow us to aggressively invest in building and creating high-quality content for our direct-to-consumer platforms to meet the growing demands of viewers," said Disney CEO Bob Iger.

Comcast shares were marked around 0.35% higher in New York Wednesday and changing hand at $35.54 each while Sky shares traded at £17.26 each by late afternoon in London, a move that extends their year-to-date gain to 72.4% and some 80% since the Fox made its first approach to buy the whole of the broadcaster in December 2016. Disney shares edged 1.08% higher to trade at $114.85 following news of the sale.

Disney also said it would it would boost investment in Hulu, the online streaming service it owns with Fox and Comast, in order to expand it international distribution network. It also intends to expand its EPSN-plus sports streaming business. 

"Disney will expand its considerable investment in the Disney-branded direct-to-consumer offering launching in late 2019 and the new ESPN+ sports streaming service, and will seek to increase investment in Hulu's content offerings and international distribution. Disney and 21st Century Fox each currently hold 30% stakes in Hulu," the company said.

Comcast CEO Brian Roberts called Sky a "wonderful company with a great platform, tremendous brand, and accomplished management team" and said the acquisition would allow the Philadelphia-based group to "quickly, efficiently and meaningfully increase our customer base and expand internationally."

TheStreet's Action Alerts Plus team has argued that Comcast has scored a major victory in besting its rival for a key European asset critical to its overseas expansion.

"While the win-win scenario was not played out immediately, we still think it will be the case ... we believe shares should be incrementally bought off this weakness because the company is now set to acquire a key, internationally based growth asset," the team said Monday. "This wasn't a short-term move. Roberts did this deal to become a major player in both the U.S. and abroad, and as a long-term shareholder, we like the deal."

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