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British pay-TV group Sky PLC has become the target of a bidding war involving some of the world's largest media companies. NBCUniversal Inc.'s owner, Comcast Corp., raised its offer to buy all of Sky to GBP25.9 billion on July 11. The move came just hours after Rupert Murdoch's 21st Century Fox Inc., which already owns 39% of Sky, increased its original bid to consolidate ownership of the U.K. company. The intensified bidding made the fight for control of Sky a central battlefield in the broader clash between Comcast and Walt Disney Co. to acquire most of Fox's entertainment assets, until Comcast dropped its pursuit of the Fox assets.

WHO'S WHO?

Sky is Europe's largest pay-TV operator, with operations in seven countries. It had more than 23 million customers as of June 30, 2018. In the fiscal year to the end of June, Sky had revenue of GBP13.59 billion and a pretax profit of GBP864 million.

Fox is an American TV and entertainment group controlled by the Murdoch Family Trust, which also controls Dow Jones's parent, News Corp, as well as several U.K. newspapers among other properties. On June 20, Fox agreed to sell most of its assets to Disney--including the Sky interest. A previous deal reached in December, was challenged by Comcast, which dropped its pursuit of the assets on July 19.

Comcast is an American cable juggernaut that owns NBCUniversal as well as the Xfinity cable and telecommunications service. It attempted to buy Fox's entertainment assets, making an unsolicited bid for them on June 13, but walked away weeks later. It continues to seek the acquisition of Sky.

The Walt Disney conglomerate houses the namesake Disney brand, Star Wars franchise owner Lucasfilm, U.S. sports channel ESPN, and Marvel in its portfolio. Disney said on June 20 that it would assume full ownership of Sky if Fox buys the stake it doesn't own prior to completion of the deal between the two American companies.

WHY SKY?

With a market value of around GBP27.18 billion as of Sept. 20, Sky has a more modest scale than its American suitors. But it is in many ways a smaller version of what American media companies are trying to become: an integrated distribution platform that produces its own content.

HOW IS THE DEAL STRUCTURED?

Comcast has lifted its offer price for Sky to GBP14.75 a share, valuing the company at $34 billion. That represents a 5% premium to Fox's latest offer and an 18% increase to Comcast's previous GBP12.50-a-share bid . Comcast said its latest offer was recommended by Sky's independent directors, who withdrew their earlier support of the Fox bid.

Fox had raised its original bid by 30% to GBP14.00 a share for the 61% of Sky it doesn't already own. Fox launched its bid to consolidate ownership of the U.K. satellite-TV company in December 2016. However, the deal came under the scrutiny of British regulators, who after a lengthy review formally cleared it on July 12.

Fox agreed to sell Sky's news operations to Disney with a promise to fund the news service with at least GBP100 million a year for 15 years, to ease government's concerns that a Sky takeover would give the Murdoch family too much influence over U.K. media.

Fox said on Aug. 7 that the deal is dependent on approval from shareholders representing 75% of Sky shares that it doesn't currently hold. However, Fox said it reserves the right to reduce the acceptance condition to a level not less than a simple majority of all Sky shares.

WHAT TOOK SO LONG?

Fox launched its bid to consolidate ownership of Sky in December 2016, but the deal was held up by British regulators. In December 2017, Fox agreed to sell most of its assets--including its current 39% stake in Sky--to Disney. From then on, the fate of the Sky takeover was linked to that of the much larger fight for the Fox assets.

Comcast, which had tried to strike a deal with Fox for its entertainment assets, emerged as a suitor for Sky in February, confirming a takeover proposal in April. In June, Comcast made a separate, unsolicited offer for the Fox assets as a whole. The Comcast move triggered a higher offer from Disney for those assets, which was accepted by Fox. Disney said then that it would take full ownership of Sky upon completion of the Fox deal, if Fox ended up buying the 61% of the U.K. company it doesn't own. Fox, backed by Disney, increased its offer on July 11, but Comcast quickly responded with a higher offer, which received the support of the Sky independent directors.

Days later, Comcast dropped its pursuit of the Fox assets and said it would focus on buying the British pay-TV group. Shareholders of Disney and Fox approved the $71 billion deal between the two companies on July 27.

The U.K. Takeover Panel has ruled that Disney would be required to offer GBP14.00 a share for 61% of Sky if it succeeds in acquiring Fox's entertainment assets, setting a floor-price in the bidding war for the British media group. The regulatory body confirmed its decision on Aug. 3, after a hearing requested by various interested parties, but on Aug. 8 the panel said it would consider appeals lodged by several interested parties against the ruling. It has scheduled a hearing to consider the appeals for Aug. 15.

After officially posting the offer documents, both Comcast and Fox extended the period for Sky shareholders to accept their bids, havingas they received fewlittle acceptances by their initial deadlines.

Investors have long expected higher bids; Sky's shares were trading at GBP15.80 on Sept. 20. Mr. Murdoch's first attempt to take over Sky at the beginning of the decade failed amid a public and political backlash over his now-defunct U.K. tabloid newspaper News of the World's phone-hacking scandal.

WHAT'S NEXT?

Comcast and Fox have until 1600 GMT on Sept. 21 to revise their offers for Sky and declare them final. If they fail to do so, the U.K. Takeover Panel will step in to settle the takeover battle via a sealed-bids auction.

The auction will consist of a maximum of three bidding rounds, starting at 1600 GMT on Sept. 21 and ending Sept. 22, the Takeover Panel said. The winning offer will be announced on Sept. 22 evening, the British regulator added.

Under the auction rules, Fox, as the lowest bidder so far, can make the only bid in the first round. In the second round, Comcast can make a counterbid. If that doesn't determine a winner, then both parties can submit offers in the third and final round. The bids won't be made public until after the auction's completion on Sept. 22.

Stu Woo and Ben Dummett contributed to this article.

(END) Dow Jones Newswires

September 20, 2018 10:17 ET (14:17 GMT)

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