Comcast CEO on Dropping Out of Fox Bidding: We "Couldn’t Build Enough Shareholder Value"
6:22 AM PDT 7/26/2018 by Georg Szalai
"It was a unique opportunity, and we were very disciplined in our approach to it, but we thought it was mostly about international expansion opportunity," said Brian Roberts. "We are focused on Sky now."
Comcast chairman and CEO Brian Roberts on Thursday said that a quickly rising price in the showdown with Walt Disney for big parts of 21st Century Fox caused the cable giant to drop out of the bidding.
"Ultimately, we pulled back because we thought that we couldn’t build enough shareholder value by making the price at which it seemed, in our judgment, to be possible to buy that, which was increasing," the exec said on Comcast's second-quarter earnings conference call in response to an analyst question.
Roberts also addressed investor questions about the company's appetite for further scale and possible hunt for other takeover targets given its pursuit of Fox. "In terms of scale, I think today's great results show that our company has scale, that it's working well, maybe even better than that," he said, with it being "the lead market leader" with key products. "In the case of Fox, it was a unique opportunity, and we were very disciplined in our approach to it, but we thought it was mostly about international expansion opportunity." He added Comcast believed that a Fox deal "was approvable in the United States."
Roberts had also touched on the topic during his opening remarks on the earnings conference call without naming names. "Let me reiterate something that has perhaps been lost in recent months," he said. "We have a unique and special company with a terrific team and great operating momentum. [Our] excellent second-quarter results underscore all of this."
The exec's comments came after Comcast last week bowed out of the bidding showdown for 21st Century Fox with Walt Disney, saying it was instead focused on sealing a deal for European pay TV giant Sky, which
reported its latest results earlier in the day. Comcast currently has the high bid worth $34 billion for Sky, in which Fox owns a 39 percent stake. Fox hasn't said yet whether it will continue to bid for Sky.
"I'd like to congratulate [Disney chairman and CEO] Bob Iger and the team at Disney and commend the Murdoch family and Fox for creating such a desirable and respected company," Roberts said then.
"We are focused on Sky now," Roberts reiterated Thursday. "We think it's a great business, it will fit well, good use of capital, it's also unique. But I don't want to say anymore today."
Comcast's stock was hurt amid the hunt for what quickly became a more expensive takeover target. Many on Wall Street have expressed hope that management could allay recent investor fears of sky-high bids for possible other takeover targets though.
"Following Comcast's announcement to walk away from Fox, we expect the dust to settle and that M&A driven volatility should subside," Jefferies analyst John Janedis said in a report. "Shares remain attractively valued, in our view, with fundamentals stable to improving." He concluded that "given a re-focus on fundamentals, we expect multiple expansion and add Comcast to our franchise pick list."
Roberts on Thursday also lauded momentum at NBC and Telemundo, as well as news network MSNBC. He said MSNBC is "now solidly ahead of CNN in primetime and closing the gap with Fox News." Concluded the Comcast CEO: "I am not sure enough focus has been paid to MSNBC an the incredible progress it has made."
Discussing the recent advertising upfront market, Roberts mentioned that the company saw high-single-digit pricing gains and a 5 percent increase in volume commitments. Upfront digital sales rose 25 percent, he added. NBCUniversal CEO Steve Burke said it was the strongest upfront for the company since Comcast first bought into NBCUniversal.
Earlier on Thursday, Comcast posted better-than-expected second-quarter earnings, including broadband subscriber growth that blew Wall Street estimates out of the water. Its NBCUniversal entertainment arm posted higher quarterly results driven by its cable networks unit.
"Comcast delivered a strong quarter, which we think should provide relief for shares, and re-focus attention on fundamentals," said Janedis in a first reaction. "Results were generally better, importantly with stronger broadband adds and cable margin upside. NBCU EBITDA continued to exceed expectations, though top-line was a bit light given timing of film slate."
He added: "While we expect Sky will remain in focus, we are encouraged by underlying trends and continue to think the stock will re-rate higher."
Comcast's stock in early Thursday trading was up 3.2 percent at $34.49.