The clash of media titans over the future of London-based pay-TV company Sky will finally be settled Saturday.
After years of maneuvering, Rupert Murdoch’s 21st Century Fox and Walt Disney Co. have teamed up to try to beat out Comcast Corp., the Philadelphia-based cable giant. Both camps want to own Sky, which provides pay-TV service, including soccer matches and other popular entertainment offerings, to nearly 23 million customers in five countries in Europe.
Rather than submitting endless offers and counter-offers, the U.S. companies have agreed to a participate in rare auction conducted by British regulators. On Thursday, the British regulatory body known as the Takeover Panel announced the format for the auction: There will be three rounds of bidding, which will begin after London’s stock market closes Friday, and the victor will be decided Saturday.
The auction marks the first time in more than a decade that British regulators have conducted such a high-stakes contest. And analysts are not sure which company will secure the multibillion-dollar prize.
“That’s the million-dollar question,” media analyst Alice Enders of the prominent Enders Analysis research firm in London said in an interview. “Both companies have a strong interest in owning Sky — it’s a top, global pay-TV asset with huge potential. There are very few companies available that stand out like Sky.”
Fox — which already owns 39% of Sky — is doing the bidding for Disney. Fox’s ambitions to consolidate Sky date back more than a decade — long before Murdoch decided to sell the bulk of his entertainment company to Disney for $71.3 billion. But now Fox plans to turn over its stake in Sky — or all of the satellite TV service should Fox win this weekend’s auction — as part of its transfer of Fox assets to Disney. Disney Chief Executive Bob Iger late last year called Sky a “crown jewel” and part of his strategy to foster direct relationships with consumers. Disney would have to cover the cost of buying the remaining stake in Sky.
Comcast jumped into the bidding in late February, eager to expand its international presence in one fell swoop. Led by cable scion Brian Roberts, the company currently has the highest offer on the table: $34 billion.
“We have admired Sky for a long time,” Roberts told investors in London in February. “We intend to build on the wonderful platform that Sky has [in Britain] to grow our businesses in the future.”
Roberts was so locked in on Sky that he withdrew an offer for Fox’s U.S.-based businesses in July, conceding that bidding war to Disney, so that he could concentrate Comcast’s firepower on landing Sky.
Disney triumphed in the race for the Fox assets, which include the Los Angeles-based movie and TV production studios, cable channels including FX and the majority stake in streaming service Hulu. But despite winning the Fox assets, Disney has not signaled a retreat in its interest in Sky, leading to the intrigue on whether it and Fox — or Comcast — will prevail in the protracted tug of war.
“There were no final offers on the table, so that’s why there will be this auction,” Enders said. “Here in the U.K., half of the people say that Disney will take it — because what Disney wants it gets.”
Fox will be allowed to raise its current offer of about $32 billion during the first round of bidding. Comcast can submit a counter-offer in the second round, and the third, and final, round is reserved for both companies to make their highest offer, according to the Takeover Panel. All bids must be in cash.
The auction was designed “to provide an orderly framework for the resolution of this competitive situation,” according to the Takeover Panel.
“It’s a very civilized way to end this contest,” Enders said.
Comcast, Disney and Fox declined to comment. Keeping mum was another condition imposed by the Takeover Panel, which forbid the various parties from making “any public statement in relation to or impacting the auction procedure.”
Sky’s shareholders will have the final say, and they have already seen the value of their investment soar because of the interest by the three U.S. companies.
The satellite TV service, which reaches customers in some of the most prosperous countries in Europe — Britain, Ireland, Germany, Austria and Italy — has such popular programming as the English Premier League of soccer and blockbuster TV shows, including HBO’s Emmy-winning “Game of Thrones.”
Comcast has argued that its businesses are compatible with Sky. Comcast has about 29 million customers in the U.S., where it provides pay-TV, high-speed internet and telephone service. Sky also provides internet and phone service, and it boasts a streaming service option to appeal to people who don’t want the satellite dish.
Sky has long been one of Murdoch’s most cherished assets. In 1989, he helped launched the satellite TV service to compete with the venerable BBC. Nearly a decade ago, Murdoch’s company attempted to buy the 61% of Sky it didn’t already own for about $12 billion. But the company was forced to withdraw that takeover attempt in 2011 when the Murdochs were embroiled in a cellphone hacking scandal at their London tabloids — a crisis that drew the wrath of left-leaning British lawmakers.
Fox in December 2016 made a formal offer to buy Sky for nearly $15 billion. But the government inquiry proceeded slowly, in part, due to resistance from activists and lawmakers who worried that the Murdoch family already had too much sway over media in Britain.
Finally, this year, Fox won regulatory approval for the deal after the company agreed to divest the Sky News channel.