Walt Disney on Wednesday consented to Fox’s decision to tender its 39% stake in Sky to Comcast. Photo: Francois Mori/Associated Press
Bob Iger, chief executive of Walt Disney , DIS 1.39% spoke of Sky as a “crown jewel” in his $71 billion pursuit of 21st Century Fox FOX 1.00% assets. In the end, though, it was a jewel he could do without. For Disney investors, that probably comes as a relief.
On Wednesday, Disney consented to Fox’s decision to tender its 39% stake in Sky, valued at $15 billion, to Comcast . CMCSA -0.08% That will put Europe’s largest pay-TV group entirely in Comcast’s hands.
Sky was the single largest-distribution asset Disney was planning to acquire as part of its deal with Fox. It would have given the company a direct-to-consumer relationship with 23 million European households. But tendering the 39% stake reduces Disney’s leverage from the Fox acquisition and gives it more room to increase spending on its streaming strategy. The company plans to launch a Disney-branded platform, a kind of Netflix competitor, in 2019. Focusing on that is surely preferable to trudging into the European broadband business.
One caveat is that the stake might have allowed Disney to get the film and TV content it licensed to Sky back sooner. Now it will have to wait for those deals to end.
Disney may have realized that Comcast was going to get the more than 50% of Sky shares it needs to complete the deal even without Fox’s stake, making the 39% worthless as a negotiating chip. Fox and News Corp , parent of The Wall Street Journal, share common ownership.
Comcast investors may be less pleased. Now the cable giant will have to fund its stratospheric offer for Sky, worth $48.6 billion including debt, in its entirety. The acquisition will help Comcast diversify away from the U.S. market, where cord-cutting has threatened subscriber growth. But to justify this price for what is in many ways a legacy media asset, Chief Executive Brian Roberts will need a fairy-tale ending.