European Media Stocks Jump Higher as Comcast Raises Bar for Sky Takeover

European media stocks led market gainers Tuesday amid speculation that Comcast Corp.'s (CMCSA) $31 billion bid for British pay-TV group Sky plc (SKYAY)  could ignite interest in rivals around the region.

Comcast surprised investors early Tuesday with an unsolicited £12.50 per share bid for Sky, a move the trump's an existing £10.75 offer from Rupert Murdoch's 21st Century Fox Inc. (FOX) which has been on the table for more than a year and has faced multiple challenges from U.K. regulators concerned about media plurality. The Comcast offer also challenges Walt Disney Corp.s' (DIS) plans to buy the 39% stake in Sky that is owned by Fox and was set to be sold to the House of Mouse following the $52 billion takeover of some of Fox's media assets agreed last year.

That complexity appears to be filtering into the share prices of other European media groups, particularly content providers, as investors bet that a Sky takeout, by either Disney or Comcast, will boost their attractiveness to U.S. buyers seeking to add subscribers and grow earnings.

Many of the biggest European media groups trade at a significant discount to their long-term PE multiples, according to recent research from Verdi Capital, owing to weakness across the sector last year in the face of falling advertising revenue in the face of intense competition from online content providers Netflix Inc. NFLX and Amazon Inc. AMZN.

Verdi also notes that this year's Winter Olympic Games, as well as this summer's FIFA World Cup, should boost ad sales and add to already attractive free cash-flow generation and relatively low debt levels.

 ProSiebenSat.1 Media SE (PBSFY) , Germany's biggest broadcaster, gained 1.4% from its Monday closing price to top the DAX performance index in Germany while Sky's U.K. rival, ITV Plc (ITVPY) , gained more than 2% to trade near the top of the FTSE 100 leaderboard. France's Vivendi SA (VIVHY) , which owns the pay-TV group Canal Plus, rose more than 1.05% in early Paris trading to change hands at a one-week high of €21.25 each.

RTL Group SA (RGLXY) , a pan-European broadcaster, was marked 1.54% higher while the Stoxx Europe 600 media index, the region's sector benchmark, gained 1.75% to hit a one-month high of 275.86 in the opening hour of trading.

Sky shares gained 19.15% in the opening minutes of trading to change hands at £13.17 each, valuing the group at just under £22.7 billion. The shares have risen around 30% so far this year. Comcast shares closed at $39.58 each in New York Monday and have fallen around 1.1% since the start of the year.