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Fox's Sky Acquisition A Nice 'Combination Of Content And Distribution'

Fox FOXA Valuation Vs. Peers, Sky Acquisition|Brean At Buy

Brean Capital’s Alan Gould expressed a favorable view of the acquisition of Sky by Twenty-First Century Fox Inc FOXA 0.18%, while mentioning that the stock appeared attractive at the current levels.

Gould maintains a Buy rating on the company, with a price target of $33.

Lowest Multiple

The analyst pointed out that Twenty-First Century Fox was currently trading at the lowest EV/EBITDA multiple among its peers, as well as the lowest revenue multiple and the highest discount to the private market value in the group given the low probability of a takeover due to the Murdoch family’s 39 percent voting control.

While there does not appear to be any obvious catalysts for the stock, Gould believes that the “consensus estimates for the TV division are too low and domestic affiliate fees growth should accelerate beginning in the March quarter.”

With regard to the Sky acquisition, the analyst said, “We like the combination of content and distribution, particularly when it prevents ‘mutually assured destruction,’ but that occurs more when one has the distribution and channels business in the same geography.”

Sky Acquisition

The analyst also expressed a favorable stance on Twenty-First Century Fox being in the direct-to-consumer business, while questioning the synergies between the company’s primary direct-to-consumer business and the European business.

Gould believes there is a 75 percent chance of the Sky acquisition receiving regulatory approval. However, if the deal falls through, Twenty-First Century Fox shares are likely to regain a significant part of the value they have lost since the deal was first announced.

However, the analyst also believes investors are likely to have “a heightened concern on what Fox planned on doing with its excess leverage capacity.”

At last check, shares of Fox were slightly up by 0.23 percent at $28.09.

Image Credit: By Jim.henderson - Own work, CC BY 3.0, Wikimedia Commons

DateFirmActionFromTo
Dec 2016Brean CapitalUpgradesHoldBuy
Dec 2016Telsey Advisory GroupDowngradesOutperformMarket Perform
Nov 2016JefferiesMaintainsBuy

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