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Walt Disney ups earnings forecasts for Sky while hedge funds pressure regulator to up bid price

Published: 06:44 27 Jun 2018 EDT

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Hedge funds with holdings in Sky are pressuring regulators to set a higher 'floor' bid price

Walt Disney Co (NYSE:DIS) has upped its 2020-2028 underlying earnings (EBITDA) forecasts for Sky PLC (LON:SKY), while hedge funds with shares in the FTSE 100 pay-TV group are pressuring UK regulators to increase the ‘floor price’ for takeover bids.

In the latest twist in what has become a bidding war over Sky and parts of its largest shareholder, 21st Century Fox Inc (NASDAQ:FOX) controlled by media mogul Rupert Murdoch, Disney said in a filing to the US Securities and Exchange Commission (SEC) that it expected Sky to make earnings before interest, taxes, depreciation, and amortisation of £3.06bn in the year ending June 30 2020, up from its original forecast of £2.41bn.

READ: Sky shares rise after Disney US$88bn bid for 21st Century Fox

However, the media company also lowered its 2019 profit forecast for Sky, cutting its estimates to £2.51bn from £2.61bn.

While Disney didn’t give a reason for the upgraded forecasts, Sky secured the TV rights for England's Premier League at a lower-than-expected price in February, which made analysts increase their earnings expectations for the company.

Meanwhile, hedge funds with holdings in Sky are asking UK regulators to set a higher ‘floor price’ (minimum required bid) for the group following the increased earnings forecasts from Disney, which they see as a sign the valuation of the company has increased.

READ: Clash of the (media) titans: What is driving the Fox, Comcast, Disney bidding war over Sky?

Sky is currently at the centre of a bidding war between three of the world’s biggest media companies, Disney, Fox, and Comcast Corp (NASDAQ:CMCSA), all vying for control of the broadcaster as well as a package of other film and TV assets owned by Fox that it has put up for sale.

While the Fox takeover of Sky and the Fox asset purchase by Disney were initially seen as straightforward, a bid by Comcast for both the non-Fox owned Sky shares and the Fox assets has escalated the situation.

In late morning trading Wednesday, Sky shares were up 0.2% at 1,440p.

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