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Comcast should buy Sky while Disney rest from Fox Assets – takes variety



Comcast should focus on buying Sky while Disney takes over the remainder of the 21st Century Fox assets, which are the focus of a bidding war between the media giants. This is the opinion expressed by Moody's Investor Service in a Friday report on the debt implications of the escalating battle between Disney and Comcast.

Moody's rating agency sees a compromise approach to the assets of Fox as the best result for the debt ratios of Disney and Comcast. Comcast and Disney have both offered for the majority of 21

st Century Fox. Comcast has separately made a $ 31 billion offer to purchase Sky, the European satellite platform. Fox currently owns 39% of Sky, a stake included in Disney's latest $ 71.3 billion contract for Fox.

"From a strategic perspective, we believe a Disney-Fox marriage is a Comcast-Fox combination," says Moody's analyst Neil Begley wrote in the report. "Disney's ability to monetize intellectual property across its businesses is unsurpassed in the industry, and a Comcast-Sky marriage is strategic because both are pay-TV providers and Comcast is a cable distributor, and content companies second.

The Moody's report suggests that Disney and Comcast are part of the dissolution of the bidding war that has been brewing since last fall. The Fox sale will also include Fox's 30% stake in Hulu, the streaming platform that also holds Disney and Comcast 30% holdings – meaning that Disney or Comcast will end up with a controlling stake in Hulu if any of them outnumber the acquisition of Fox. 19659002] Moody's suggests that Disney could swap the 39% stake in Sky, which he will inherit from Fox for Comca's 30% stake in Hulu. The complexity of these property interests could be the building blocks of an agreement.

"However, this could also be an opportunity as Disney and Comcast could agree on an asset swap whereby Comcast will receive Disney's 39% stake in Sky and Disney will receive Comcast's 30% equity in Hulu and alleviates the governance issues that could arise from sharing these assets, "Moody's wrote.

If Comcast took over both Fox and Sky, the debt-to-profits ratio would reach a high 4.4x, Moody's estimates. If Comcast only buys Sky, its debt burden would be a manageable 2.9-fold profit. If Disney bought both Fox and the rest of Sky, its debt load would multiply a fourfold profit, which is still on the high side. If Disney only bought Fox, the ratio would be 3.5 times higher, according to Moody's.

Although Sky and its reach in the UK and Europe is a large part of the appeal of the Fox deal for Disney and Comcast, Moody's observer that Disney will be under pressure to pay more for Sky after being Disney Offer for all of Fox has increased, including the 39% stake in Sky. Under the UK law, Disney must make an offer to the rest of Sky if it manages to buy the Fox stake. To further complicate the matter, Fox is also trying to close its long pending agreement to buy the remaining stake in Sky, although this was complicated by the competing offer Comcast made in April.

Moody's suggests that Disney would "We believe that both Fox and Sky are transformative assets on a stand-alone basis that positions both Disney and Comcast better in the face of changing consumer behavior regarding content consumption" wrote Moody & # 39; s. "A scenario in which Disney Fox could take over and Comcast was able to acquire Sky would be the most desirable outcome for the bondholders of all companies and would likely prevent one or the other from becoming the world's most heavily indebted non-financial corporation. However, the attractiveness of Fox's most important assets, as well as the lack of other comparable goals, means that rational minds must triumph over emotions so that the shareholders and bondholders of both companies are the winners. "


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