Sky powers on as takeover drama heads for final act

By Paul Sandle

LONDON (Reuters) - Sky, the pay-TV group at the centre of a bidding war between Rupert Murdoch's Fox and Comcast, posted double-digit earnings growth after its customer base rose to more than 23 million households, underlining its appeal to its U.S. suitors.

"It's been an exceptional year of progress, delivering against our plans but also laying the groundwork for the future," Chief Executive Jeremy Darroch told reporters.

"[We are] excited about the opportunities ahead no matter what our future ownership structure is, we're certainly not slowing down."

U.S. cable company Comcast is leading the race to buy Sky after it offered 14.75 pounds a share this month, valuing the group at $34 billion. The bid came just hours after Fox had upped its own bid to 14 pounds.

 

Sky, which is already 39 percent owned by Fox, reported a 11 percent rise in core earnings for its established business to 2.5 billion pounds ($3.3 billion) for the year to June 30.

Revenue was up 5 percent to 13.59 billion pounds, beating a forecast by UBS, as the company said it had attracted more than 500,000 customers across its main markets in Britain and Ireland, Germany and Austria and Italy.

Darroch said Sky's unrivalled content in sport, drama and entertainment would be bolstered by major new partnerships with Netflix, BT Sport, Mediaset Premium and Spotify, helping deepen the relationship with its customers.

Shares in Sky are trading at record levels, and above Comcast's latest offer, as investors bet that Fox will return with a higher bid. They were up marginally at 1,508 pence at 0840 GMT.

Lee Wild, head of equity strategy at Interactive Investor, said Sky had shown just why Fox and Comcast were fighting tooth and nail for control of the satellite broadcaster.

"These numbers and a bullish plan for further aggressive growth in the current financial year are clearly presented to squeeze the maximum from potential buyers," he said. "It could work."

Darroch, in the top job since 2007, said it was too early to say whether he would stay with the pan-European group after it is sold.

The fight for Sky had been played out in the shadow of a bigger battle in the United States between Comcast and Disney to buy most of Fox's assets, including its stake in Sky.

Comcast conceded that contest to Disney a week ago, in part because the bidding war was inflating the value of Sky, given Fox's partial ownership, according to sources.

Fox - and by proxy Disney - has until August 9 to increase its bid for Sky, a move which could cause British regulators to trigger an auction procedure. ($1 = 0.7589 pounds)

(Reporting by Paul Sandle; editing by Kate Holton)