Bidding war for Sky to be settled by rare auction


The takeover battle for Sky plc, the owner of Sky News, will be decided in a three-round auction to conclude on Saturday evening, it was announced today.

The Takeover Panel said the two American companies bidding for control of Sky – film and TV group 21st Century Fox and cable giant Comcast – would be invited to take part in a three-round auction on Saturday if a competitive situation between the pair continued to exist by 5pm on Friday.

The company going into the auction with the lowest offer, currently Fox, will be the only party allowed to increase their bid in the first round of the auction. The company excluded from the first round, currently Comcast, would be the only party allowed to increase their bid in the second round.

If no clear winner has emerged at that point, with no increased bid being made in the second round, then there would be a third and final round in which both Fox and Comcast would be allowed to make increased bids.

Brian Roberts is the chairman and chief executive of Comcast
Image: Brian Roberts, Comcast CEO, has signalled a determination to win the race for Sky

The Panel said the auction would be completed on Saturday evening and that it would make an announcement as “soon as practicable” after that. It is conceivable, under the auction, that Fox and Comcast could come up bidding identical sums for Sky.

Such auctions are exceptionally rare and this will only be the fifth takeover to be decided in this way since the rules were changed in 2002.

The last auction conducted by the Panel was in April 2008 when the American company Manitowoc bought the kitchen equipment maker Enodis for £948m. On that occasion, the auction was settled in a one-round ‘sudden death’ shoot-out.

Before then, the last auction had been in January 2007 when, after an eight hour contest, Tata Steel of India triumphed against Brazilian firm CSN with a £6.2bn bid for Corus, the owner of British Steel.

Some people have criticised the auction process for raising the risk of companies over-paying. Ratan Tata, chairman of the Tata Group, said after his victory in the auction for Corus: “On the one hand, you want to do the right thing by your shareholders. On the other hand, you do not want to lose.”

The two other companies whose fates have been decided by the auction procedure are Canary Wharf Group, the commercial property giant and QXL Ricardo, an online retailer.

The auction will bring to an end one of the UK’s longest running takeover battles in history.

A branch of 21st Century Fox was raided. File pic
Image: Fox renewed its bid interest in Sky in December 2016

It began when, in December 2016, Fox – which, with a 39.1% stake, was already Sky’s biggest single shareholder – said it wanted to take full control.

Its offer valued the whole of Sky at £18.5bn. The deal was held up for more than a year after the UK government referred it to Ofcom, the telecoms and media regulator and the Competition and Markets Authority, the UK’s main competition regulator.

By the time the government was ready to give the deal the go-ahead, Comcast had trumped Fox with a rival offer, valuing Sky at £22.5bn.

Fox hit back in July with an increased offer, valuing Sky at £24.5bn, before Comcast came back on the same day with a raised offer valuing Sky at £26bn. That remains the highest offer on the table.

Since the bid battle got underway, Fox has agreed to sell its entertainment assets to Disney, including its stake in Sky.

This means that, should Fox emerge victorious from the auction, Sky will eventually become part of Disney.

Both Disney and Comcast have made undertakings to the UK government that guarantee the funding and editorial independence of Sky News should they take control of Sky.

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Shares of Sky, which are currently valued at 1475p under Comcast’s latest offer, were up 1p at £15.81p at 13:05 BST.

A number of hedge funds have bought shares in Sky during recent months and are hoping both sides could end up paying substantially more. One of them, Crispin Odey, has said he expects the bidding to reach £18 a share.

From – SkyNews


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