CMCSA Comcast Corporation

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)

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