Comcast Expects Rivals Over Sky to Raise Bid - Sources

Comcast is expecting its rivals at Disney and Fox will force them to raise their bid a notch, likely by billions of dollars, in the coming one-day auction for British satellite TV provider Sky, according to people familiar with the matter.

In the coming weekend, Comcast and Fox, which is working in concert with Disney, will end their months-long battle to take over Sky, with split ownership between Fox and soon to be Disney and public shareholders.

The companies have been going back and forth for many times with increased bids for Sky, but neither of them has said its offer is “best and final.” To put an end to the prolonged process, the UK takeover panel has made the seldom-made decision to settle ownership with a three-round quick-fire auction, which will be held this weekend, according to a UK takeover panel statement.

So far, Comcast has made the highest bid for Sky, offering 14.75 pounds per share, which is equivalent to $34 billion. Fox’s offer stands at 14 pounds per share. Disney is already acquiring Fox’s 39 percent stake in Sky, part of the business’s $37.3 billion acquisition of many Fox assets in the early part of this year. Disney CEO Bob Iger has stated repeatedly that he is interested in owning all of Sky.

At present, Comcast is assuming Fox/Disney will increase its bid for Sky whether or not it ends up buying the asset, according to the sources.

The move would be a reply to Comcast’s actions earlier this year in negotiations over Fox. Those competing bids pushed Disney’s price to buy the majority of Fox nearly $20 billion higher, from an initial price of $52.4 billion to an end valuation of more than $71 billion, said the people familiar with the matter.

Still, Comcast thinks that Disney may have long ago decided that it’s willing to give up on Sky, said the sources. Disney could also legitimately duke it out with Comcast to own the pay-TV distributor and owner of European content, which include valuable live soccer rights.

Either way, Sky shareholders are expecting a new round of bids. Sky is trading at around 15.80 pounds per share, which is way higher than Comcast’s most recent bid.

The Auction

According to the auction rules that were stated by the UK takeover panel, Fox/Disney will bid first since it currently has the lower bid.

Comcast thinks that there is some advantage to bidding second since it will be able to see how serious Fox/Disney is over raising the price higher for Sky, said the sources. After that, Comcast may manage to top the initial bid for Sky. The bid is also public.

Afterward, there will be a final round where each of the parties can raise the bid one more time. Neither side will be able to see the final offers. The takeover panel will then announce the final bids from each party.

It may be possible that the final bids from each company will be identical. In any case, Sky shareholders will then cast their votes on a winner. All bids, just as the current outstanding offers, will be in cash.

In 2008, the takeover panel used the same strategy with the same mechanics to conclude a bidding war between Hydrogen Group and Premier over a UK-based recruitment company called Imprint. In a twist, neither Hydrogen nor Premier raised their bids in the auction. Premier managed to bag the deal with the recommendation of the Imprint board.

So far, Sky’s board is recommending the higher Comcast offer.

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