The £26bn takeover battle for Sky is set for a dramatic ending on Saturday when Rupert Murdoch’s 21st Century Fox and US cable group Comcast will be forced into a high-stakes auction for the pay-TV operator.
The Takeover Panel, which regulates public dealmaking in the UK, has laid out the guidelines for up to three rounds of an auction process that will decide the owner of Sky.
The winner-takes-all process will conclude an almost two-year takeover battle in just a single day, with the rivals each able to tender up to two bids in a matter of hours in what will be a test of auction gamesmanship.
Sky has been in play since December 2016 when Fox struck an initial agreement to buy the portion of the European pay-TV operator that it did not already own at a price of £10.75 per share.
Fox holds a 39 per cent stake in Sky, which means that it stands to benefit from an improved price should Comcast win. If Fox wins, the company will ultimately be owned by Disney, which has separately agreed to buy the majority of Fox, including its Sky stake, for $71bn.
Disney initially fended off competition for Fox from Comcast late last year. However, Comcast then launched a two-pronged assault in 2018. First it bid for Sky to disrupt the deal struck in December 2016 and then forced Disney to raise its bid for Fox by $20bn.
The process revealed on Thursday is an unusual conclusion to a UK takeover battle. Only a very few panel-run auctions have been staged in the UK since 2000. Corus was sold to Tata by auction in 2008, while the sale of the Canary Wharf development was also decided through the procedure back in 2004.
In this case, it was triggered by panel rules after neither Comcast nor Fox declared their latest bids best-and-final with just two weeks to go before the end of a 60-day offer period.
The companies, along with the Walt Disney Group, which has acquired the vast majority of Fox since its initial bid for Sky, have all agreed to the weekend auction.
The process comprises three rounds. In the first, the participant with the lowest offer will be able to make an increased bid, which can be topped by the other party in the second round. If the auction procedure has not concluded after the second round — which it will if no increased bid is made — there will be a final round, in which both suitors may make an increased bid.
As it stands, Comcast has tabled a £14.75-a-share offer for Sky, while Fox has bid £14-a-share. By mid-morning in London, Sky shares were trading at £15.81 in anticipation of further price increases by the two companies.
The fight has centred on a battle for Sky’s 23m subscribers, which Disney and Comcast hope to get hold of to boost their distribution, technology and content production at a time when the media landscape has been upended by the rise of Netflix and Amazon.
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