By Stu Woo and Ben Dummett
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (September 21, 2018).
LONDON -- Comcast Corp. and 21st Century Fox Inc. will settle
their takeover battle for Sky PLC in a weekend auction run by
British regulators, setting up a dramatic climax to a 21-month sale
process that has pitted some of the world's biggest media giants
against each other.
The U.K. Takeover Panel, which polices deal making in the
country, laid out rules for the auction on Thursday. It is a
process the regulator hasn't run many times previously -- and never
before with such a large company as the prize. London-listed Sky
has a market value of some $36 billion.
Such government-mandated auctions of big, publicly traded
companies are rare. The Sky auction pits Rupert Murdoch's 21st
Century Fox, which already owns 39% of Sky, against Comcast. Walt
Disney Co. has separately agreed to buy a big chunk of Fox,
including its Sky stake, for $71 billion.
That puts Disney Chief Executive Bob Iger and Mr. Murdoch on the
same team, bidding against Comcast CEO Brian Roberts. Because Fox
already owns a big stake in Sky, the Disney-Fox team has an
interest in driving up the bidding, even if it doesn't ultimately
win. That would make the stake more valuable should it decide to
sell it to Comcast.
The three media companies have competed against each other --
and made deals with each other -- over years, as they each steered
their respective companies and helped reshape the U.S. media
industry. Fox and Comcast declined to comment. Representatives from
Disney weren't immediately available for comment.
Mr. Murdoch has long sought to consolidate his holding in
London-based Sky. Disney and Comcast see Sky as a way to expand
internationally. The broadcaster also sells wireless, TV and
internet services throughout Europe, and it is a media company that
produces its own news, entertainment and sports programming.
Mr. Murdoch and his family are major shareholders in Fox and
News Corp, which owns The Wall Street Journal.
Regulators resorted to an auction process after Fox, backed by
Disney, and Comcast engaged in what was starting to look like an
endless series of bids and counterbids for the broadcaster.
The auction will start Friday evening and run through Saturday,
and consist of a maximum three rounds of bidding. The winner will
be announced shortly after the auction ends Saturday evening. If
there is a third and final round, it will be conducted with sealed
bids -- secret, final offers made to the regulator.
Fox first offered in December 2016 to buy the rest of Sky it
didn't already own for GBP10.75 ($14.27) a share. After Fox's
merger proposal hit regulatory and political delays, Comcast made a
surprise offer last February, for GBP12.50 a share.
Comcast made the most recent offer in July, for GBP14.75
($19.57) a share, valuing Sky at $34 billion. That is above Fox's
current bid, also made in July, of GBP14 a share.
Investors have long expected higher offers. Sky's shares were
flat Thursday, closing at GBP15.80. The two sides could also
increase their bids before the auction, or drop out before it
starts, though there is little incentive to do so.
Under the auction rules, only Fox can bid in the first round. In
the second round, Comcast can counterbid. If that doesn't determine
a winner, each side can submit sealed-bid offers in the third and
final round. The sides can also make a conditional bid. That is a
bid that counts only if the other side also makes a bid.
British regulators most recently held a takeover auction in
2008, when Wisconsin-based Manitowoc Co. beat Illinois Tool Works
Inc. with a $2.7 billion bid for British food-equipment
manufacturer Enodis. In that case, the panel and companies agreed
to disclose only the winning bid.
In 2007, India's Tata Steel Ltd. and Brazil's Companhia
Siderúrgica Nacional agreed to as many as nine, rapid-fire bidding
rounds, in their duel to acquire Anglo-Dutch steelmaker Corus Group
PLC. After an auction that went late into the following morning,
Tata won with a bid of GBP6.08 a share, or GBP6.2 billion. CSN bid
GBP6.03 a share.
Also called blind auctions, sealed-bid auctions are common for
selling real estate, professional-athletes rights and cellular
airwaves. In cellular-airwave auctions, wireless carriers hire
game-theory experts to help them figure out the value of the
airwaves they want and a strategy for winning the bidding, said
Steve Blythe, whose job is to oversee such auctions for French
wireless operator Orange SA.
Often, part of the calculus is trying to ensure that even if a
bids fail, rivals spend as much as possible, said Mr. Blythe, who
has participated in about a dozen auctions.
In a sealed-bid auction with only two contestants, only the last
round really matters, he said. Early-round bids could contain
useful information -- or be bluffs -- but "it's what happens in the
last round that matters," he said.
Write to Stu Woo at Stu.Woo@wsj.com and Ben Dummett at
ben.dummett@wsj.com
(END) Dow Jones Newswires
September 21, 2018 02:47 ET (06:47 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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