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Sky takeover auction draws near

If Comcast and Fox (and the latter’s likely new owner, Disney) want to secure Sky, they are going to have to cough up more cash
September 19, 2018

The fierce game of cat and mouse that has entangled Sky (SKY), Comcast (US:CMCSA) and 21st Century Fox (US:FOXA) for nearly two years will soon come to a head. Both bidders – Comcast and Fox – have made generous offers for Sky, but neither is willing to confirm its final price. Sky’s shareholders are also hanging out for more – as of 12 September, just 0.3 per cent of investors had accepted Comcast’s bid, while at the time of writing the shares were trading hands at 1,570p – 95p more than the highest offer.

IC TIP: Hold at 1581p

So, to break the deadlock, the two would-be acquirers will now have to participate in a sealed auction. Come 22 September, if neither company has made a final bid, they will both have to submit offers to the UK’s takeover panel. The highest wins. Simple?

Or maybe not. The process, which will be triggered if no final bid is made by the end of the offer period, is immensely complicated and explained in a 48-page document in the takeover code. The document cautions that the two bidders could complicate matters by submitting ‘formula offers’. For example, Comcast may make a bid which states it will always pay 20p higher than Fox.

Regardless of the outcome, this is an unusual scenario – UK mergers hardly ever drag on this long and rarely result in a sealed auction. But then this is a high-stakes bidding process, which neither company wants to get wrong.

The arrival of digital streaming services including Amazon's (US:AMZN) Prime and Netflix (US:NFLX) have shifted the landscape of the global media industry, which has sparked a wave of consolidation as legacy media companies seek to fight off new competition. The deal is complicated by the fact that Fox already owns 39 per cent of Sky and is also in the process of being bought by US media giant – and Comcast’s big rival – Walt Disney (US:DIS). Thus, if Comcast does manage to secure its desired number of shares (50 per cent plus one) in the takeover process, it will still ultimately have to share Sky with Disney.