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Explainer: Auction battle looms for Comcast and Fox as Sky bidding deadline nears


Reuters LONDON
By Ben Martin
LONDON (Reuters) - Britain's takeover regulator could take the rare step of intervening in the battle between Comcast and Twenty-First Century Fox for Sky next month by staging an auction for the broadcaster to bring the drawn-out bidding war to an end.
The Takeover Panel has the power to instigate a formal auction process for London-listed Sky to help resolve its future if two competing bids that have not been declared final remain on the table for the company on Sept. 22, according to Britain's takeover code.
There have only been three British takeover situations since 2007 that have involved auctions handled by the regulator, including the 6.2 billion-pound ($8.1 billion) sale of Anglo-Dutch steelmaker Corus to India's Tata Steel, according to analysis by Reuters.
A fourth battle ended just before an auction was due to start when Royal Dutch Shell abandoned its takeover attempt of gas explorer Cove Energy in 2012, allowing Thailand's PTT Exploration & Production to clinch a $1.9 billion deal. That marked the last time the Panel invoked the auction procedure.
Cable giant Comcast currently leads Rupert Murdoch's Fox in the fight for Sky with a 14.75 pound a share offer last month that values the broadcaster at 25.9 billion pounds and has been recommended by the pay-television group's independent directors.
That trumped the 14 pound a share offer made by Fox earlier in July for the 61 percent of Sky it does not already own, and is 37 percent above Fox's original 10.75 pound a share bid.
Sky's shares currently trade at 15.44 pounds.
Under the current timetable for a deal, which can be changed by the Panel, Fox and Comcast are free to lift their bids at any point up until the Sept. 22 deadline.
If neither suitor has admitted defeat by then, the regulator can step in and start an auction. The Panel did not comment.
The aim of an auction is to bring a protracted bidding war to a close by giving the suitors an opportunity to submit revised offers in an orderly process managed by the Panel, which remains neutral. But it can also serve to drive up the price that the successful suitor ultimately pays.
"I hope it goes to an auction," said Crispin Odey, whose eponymous hedge fund is a top-20 shareholder in Sky. "Every day I look at that price and think: 'Why is it not at 18 pounds?'"
In 2007, there were concerns that Tata overpaid for Corus after it became embroiled in a lengthy fight for the steelmaker with Brazilian firm Companhia Siderurgica Nacional.
The Panel eventually stepped in and ran an auction that went for nine rounds over the course of about eight hours and finished in the early hours of a Wednesday morning. Tata emerged the winner with a 608 pence a share offer, a third higher than its original 455 pence bid.
Tata's expensive foray into British steelmaking later proved problematic for the Indian group after overcapacity in Europe plunged the UK's steel industry into crisis in 2015.
It subsequently agreed a deal to create a European steel joint venture with Germany's ThyssenKrupp earlier this year to help their operations withstand the pressures facing the industry.
Since the Corus sale, the Panel has tweaked the rules governing auctions so that unless the bidders and target agree an alternative procedure, the regulator runs a five-round process over five consecutive business days.
The suitors can announce revised offers by 5pm each day up until the fifth day, after which no new bids are allowed and the offers become final. The auction ends earlier than the fifth day if there is a round that draws no new offers.
The Sky battle is one part of a much broader consolidation sweeping the entertainment industry as the growth of Netflix and Amazon force the world's traditional media giants to spend tens of billions of dollars to keep pace.
Fox's existing 39 percent shareholding in Sky is part of a host of TV and film assets that Murdoch's group has agreed to sell to Walt Disney for about $71 billion.
Comcast was also vying to buy those Fox assets until it dropped out of that battle in July to focus on taking control of Sky.
($1 = 0.7686 pounds)
(Reporting by Ben Martin; Editing by Mark Potter)

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First Published: Aug 30 2018 | 6:20 PM IST

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