Sky owner Fox has edge over Comcast in close auction, sources say
MergerMArket
Twenty-First Century Fox [NASDAQ:FOX] holds the upper hand over Comcast [NASDAQ:CMCSA] if both US media groups end up submitting very close bids for Sky [LON:SKY], three sources familiar with the matter said.
With an auction looking to determine the outcome, Fox, which already holds 39% of Sky, does not necessarily have to outbid Comcast to win, the first source said.
The auction does not determine who wins the business, it determines the highest prices the bidders are willing to pay, this source said. The offers, to be operative, need to meet minimum conditions. If those conditions aren't met, there is no completed deal, this source pointed out.
Even if there’s some price differential, Sky’s board would have to make a judgement around the ability of one party over the other getting over the acceptance threshold and getting the deal completed, this source continued.
Philadelphia-based Comcast and New York-based Fox have been trading bids for Sky, with Comcast now sitting with the highest bid at GBP 14.75 per share. Fox’s offer currently stands at GBP 14 per share. Sky shares in London this morning were trading at GBP 15.86, valuing the group at GBP 27.19bn.
Already owning a 39% stake in Sky, effectively lowers the percentage of independent shareholders Fox needs to back its offer in order to win the deal, the three sources said. Fox’s offer is currently conditional on 75% acceptances from independent shareholders as it is aiming to delist Sky. However, it has the option to lower its threshold to 50% plus one share of overall shares.
For Comcast to win, it has to line up 50% plus one of all outstanding shares. Without Fox’s 39% stake, Comcast needs over 82% of independent shares to support its bid, whereas Fox only needs to secure 18% of independent shares. As such, if Fox and Comcast table the same or very close bids, Fox holds a procedural advantage in securing approval and could be favored to prevail, the sources said.
The parties have today, 21 September, to offer any further bids, after which the bidding war is set to go to a one-day auction administered by the UK takeover panel on Saturday. The auction runs in three rounds: the lower bidder will first table a bid; the higher bidder will then table its own bid; then, in the third round, both companies will make their best and final offers.
Separately, Comcast engaged in a bidding war with the Walt Disney Company [NYSE:DIS] throughout the summer for the majority of the assets of Fox. Disney ultimately prevailed, reaching a USD 71.3bn deal that includes Fox’s 39% stake in Sky.
If Comcast puts in a bid that significantly exceeds the value that Disney anticipates that it can extract from the asset, Disney will have to consider pushing Fox into tendering its stake into Comcast’s offer, the first source said.
Any outcome for Disney can be perceived as a win, this source said. It will either succeed at a price it is comfortable with or will extract a high price from Comcast for its stake.
The outcome is difficult to call, but both parties are locked in and seem serious in their pursuit of Sky, the second source familiar said.
With an auction looking to determine the outcome, Fox, which already holds 39% of Sky, does not necessarily have to outbid Comcast to win, the first source said.
The auction does not determine who wins the business, it determines the highest prices the bidders are willing to pay, this source said. The offers, to be operative, need to meet minimum conditions. If those conditions aren't met, there is no completed deal, this source pointed out.
Even if there’s some price differential, Sky’s board would have to make a judgement around the ability of one party over the other getting over the acceptance threshold and getting the deal completed, this source continued.
Philadelphia-based Comcast and New York-based Fox have been trading bids for Sky, with Comcast now sitting with the highest bid at GBP 14.75 per share. Fox’s offer currently stands at GBP 14 per share. Sky shares in London this morning were trading at GBP 15.86, valuing the group at GBP 27.19bn.
Already owning a 39% stake in Sky, effectively lowers the percentage of independent shareholders Fox needs to back its offer in order to win the deal, the three sources said. Fox’s offer is currently conditional on 75% acceptances from independent shareholders as it is aiming to delist Sky. However, it has the option to lower its threshold to 50% plus one share of overall shares.
For Comcast to win, it has to line up 50% plus one of all outstanding shares. Without Fox’s 39% stake, Comcast needs over 82% of independent shares to support its bid, whereas Fox only needs to secure 18% of independent shares. As such, if Fox and Comcast table the same or very close bids, Fox holds a procedural advantage in securing approval and could be favored to prevail, the sources said.
The parties have today, 21 September, to offer any further bids, after which the bidding war is set to go to a one-day auction administered by the UK takeover panel on Saturday. The auction runs in three rounds: the lower bidder will first table a bid; the higher bidder will then table its own bid; then, in the third round, both companies will make their best and final offers.
Separately, Comcast engaged in a bidding war with the Walt Disney Company [NYSE:DIS] throughout the summer for the majority of the assets of Fox. Disney ultimately prevailed, reaching a USD 71.3bn deal that includes Fox’s 39% stake in Sky.
If Comcast puts in a bid that significantly exceeds the value that Disney anticipates that it can extract from the asset, Disney will have to consider pushing Fox into tendering its stake into Comcast’s offer, the first source said.
Any outcome for Disney can be perceived as a win, this source said. It will either succeed at a price it is comfortable with or will extract a high price from Comcast for its stake.
The outcome is difficult to call, but both parties are locked in and seem serious in their pursuit of Sky, the second source familiar said.
It is technically possible that both parties could put in equal bids and shareholders could fail to give either party enough support, the first source said. It is also possible that Sky’s board of directors could recommend one offer, but shareholders go for the other, he said.
There is also a long-shot possibility that, given the relatively concentrated independent ownership of Sky, a small number of holdout shareholders, believing in the possibility of a higher offer in a future bid, refuse to support either deal and kill a transaction, this source said.
Given the uncertainty for Sky as a standalone entity and the likelihood of a steep fall in the company’s share price absent a deal, this would be a high-risk decision to make, the second source said.
Following the auction, the parties have until mid-October to reach the minimum acceptance threshold necessary from shareholders.
There is also a long-shot possibility that, given the relatively concentrated independent ownership of Sky, a small number of holdout shareholders, believing in the possibility of a higher offer in a future bid, refuse to support either deal and kill a transaction, this source said.
Given the uncertainty for Sky as a standalone entity and the likelihood of a steep fall in the company’s share price absent a deal, this would be a high-risk decision to make, the second source said.
Following the auction, the parties have until mid-October to reach the minimum acceptance threshold necessary from shareholders.
Fox and Comcast declined to comment.