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The Fall Of Sky’s Risk Premium

06 December 2017 by lberuti

According to press reports, a deal between DIS ( Walt Disney Co ) and 21st Century Fox could be announced as early as next week. The deal would be worth north of $60Bln on an enterprise value basis and include Fox’s studio, some of its television networks, regional sport networks as well as its stakes in Hulu, Star India and SKYLN ( Sky Plc ). Fox has also been in talks with CMCSA ( Comcast Corporation ) regarding assets sale, but DIS is seen as a better strategic fit with less regulatory hurdles. Given the unexpected roadblock antitrust regulators put in front of the AT&T-Time Warner deal, selling assets to DIS seems like the safest road ahead for Fox and the Murdoch family. As part of the deal, DIS is said to be interested in owning all of SKY, which, given Fox’s 39% stake, would only make the company comply with the UK Takeover Panel rules which effectively compel DIS to make an offer for the remaining 61%. With DIS’s 5-year risk premium trading between 30 and 35bps, investors considered 60bps was far too high for SKY’s and they sent it 16bps tighter to 46bps over the last two trading sessions.