By Ben Dummett 

LONDON -- British regulators said Comcast Corp. and 21st Century Fox Inc. will settle their takeover battle for Sky PLC via an auction starting Friday, setting up a dramatic climax to a 21-month sale process that has pitted some of the world's biggest media and entertainment giants against each other.

The U.K. Takeover Panel said Thursday the auction would consist of a maximum three rounds of bidding, starting Friday and ending Saturday. The winning offer would be announced Saturday, the British regulator said.

Auctions are unusual for corporate deal making, and extremely rare for settling a takeover of a public company the size of Sky. The British broadcaster has a market capitalization of more than $35 billion, and a successful bid could likely top that.

The auction pits Rupert Murdoch's 21st Century Fox, which already owns 39% of Sky, against Comcast. The Walt Disney Co. has separately agreed to buy a big chunk of Fox, including its Sky stake. That puts Disney and Fox on the same team in the weekend auction.

Regulators resorted to the auction after Fox and Comcast kept one-upping each other's bids for Sky. Comcast made the most recent offer in July, for GBP14.75 ($19.41) a share, valuing Sky at $34 billion. That is above Fox's current bid, also made in July, of GBP14 a share.

Sky's stock traded at GBP15.77 in morning trading on Thursday, as investors bet a Comcast-Fox auction will further drive up the value of the pan-European broadcaster.

Fox could drop out of the auction before its official start by saying it has no plans to raise its current bid. But Fox has reason to participate in the auction -- even if it expected to ultimately lose. By owning 39% of Sky, Fox benefits if its participation drives up Comcast's bid in the auction. That means Fox would make more money by selling that minority stake to Comcast.

Mr. Murdoch and his family are major shareholders in both Fox and News Corp, which publishes The Wall Street Journal.

Write to Ben Dummett at ben.dummett@wsj.com

(END) Dow Jones Newswires

September 20, 2018 05:48 ET (09:48 GMT)