Economic guru Jim Cramer predicts there will be a bidding war between Walt Disney Company and Comcast over international broadcasting group Sky.
U.S. cable giant Comcast Corp has offered $31 billion for Sky Plc, threatening a plan hatched by Rupert Murdoch's Twenty-First Century Fox Inc and Walt Disney Co to seize control of Europe's biggest pay-TV group, Reuters reported.
The world's biggest entertainment company and owner of NBC and Universal Pictures said on Tuesday it proposed to offer 12.50 pounds per share for Britain's Sky, more than the 10.75 pounds that Murdoch's Fox has agreed to pay for it.
Bob Iger's Disney has agreed to buy Sky from Fox, along with other assets, in a separate $52 billion follow-up deal.
Comcast's all-cash, unsolicited offer pits CEO Brian Roberts against Murdoch, the 86-year-old tycoon who helped to launch Sky and pioneered pay-TV in Britain. Iger is also a long-time rival after Comcast tried and failed to buy Disney in 2004.
Cramer argued on CNBC that Comcast's $31 billion bid complicated the predetermined deal between Disney and Fox, upping the ante and potentially forcing Disney's hand to pay more for Sky.
"There are many permutations to these machinations, too many to mention here, but both Disney and Comcast want this asset so I bet a bidding war does ensue," the "Mad Money" host said on Tuesday.
Regardless of what happens, Cramer urged investors to keep faith in Disney.
"Disney is still a fabulous story, with or without the British satellite TV business and its ancillary distribution in Europe," Cramer said.
Comcast's appearance in the already complex Sky drama could prompt Fox to make a higher offer or Disney to make its own direct bid for Sky. Fox remains committed to its cash offer announced in December, it said in a statement.
"Sky and Comcast are a perfect fit: we are both leaders in creating and distributing content," Roberts said. Sky's shares jumped more than 20 percent, closing at 13.31 pounds, indicating that investors expect a bidding war. Shares of Comcast, Fox and Disney fell.
Media owners have been forced into increasingly aggressive deals after online groups Netflix Inc and Amazon.com Inc prompted many customers to ditch subscriptions.
Comcast bid $60 billion last year to clinch a deal with Fox, before losing out to Disney.
Sky, which provides sports programming, films and broadband to 23 million homes across Britain, Ireland, Germany, Italy and Austria, urged its investors to take no action since the approach did not represent a firm offer.
Murdoch's Fox agreed to buy the 61 percent of Sky it did not already own in a cash deal in December 2016, but the takeover has been repeatedly held up by regulators over concerns the media tycoon wields too much influence in Britain.
The shares had been trading above the asking price since Sky this month agreed to pay less than expected for Premier League soccer rights, likely boosting its future earnings and prompting investors to demand a higher offer.
It also attracted the attention of U.S. hedge fund and activist investor Elliott Management Corp, which has built up a 2.5 percent stake in Sky in recent weeks.
Hedge fund manager Crispin Odey, a former son-in-law of Murdoch who holds 1 percent of Sky, said he expected a counter offer and speculated whether Disney could make a direct bid for Sky to avoid Fox's regulatory problems.
"Once you're in a bidding war, it's not about fair value, it's about what do you think it's worth," Odey added.
(Newsmax wire services contributed to this report).
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