The protracted £25 billion bidding war for Sky (SKYB) could be decided this weekend after a surprise intervention from the takeover panel.
The takeover battle for the broadcaster has been running for nearly two years, after Rupert Murdoch's Twenty-First Century Fox (FOXA.O) first tabled a £10.75 per share bid for the 61% of the company it did not already own in December 2016.
US rival Comcast tabled a rival bid of £12.50 per share in February this year, sparking a revised £14 per share bid from Fox in July. The same day, Comcast upped its offer to £14.75.
In an unusual move, the Takeover Panel has said it will conduct an auction for Sky this weekend, provided neither Fox nor Comcast withdraw their bids by the end of today.
The auction will last for three rounds and kick off tomorrow, concluding in the evening.
'On the basis that neither offeror has declared its offer final, such that either offer may be increased or otherwise revised, a competitive situation continues to exist,' said the takeover panel in announcing the plans to the market.
'In order to provide an orderly framework for the resolution of this competitive situation... the panel executive has, after discussions with the parties, established an auction procedure.'
Laith Khalaf, senior analyst at Hargreaves Lansdown, said it was ‘anyone’s guess’ who would walk away the victor, but ‘shareholders will be delighted at how this has played out’.
The bidding war for Sky has driven the shares from £7.69 before the first bid was tabled to £15.87 today.
‘The share price currently stands around £1 higher than the best offer currently on the table, which indicates where the market thinks the bidding war will end up,’ he said.
However, he said this wasn’t something that could be accurately modelled and ‘this puts shareholders in a deal or no deal quandary, wondering whether to take what’s currently on offer by selling shares in the market, or holding out for more from the bidding process’.
‘Shareholders do, however, have the option of hedging their bets by selling some of their holding before the weekend, and keeping some in the hope that the final offer is higher than the current market offer,’ said Khalaf.
‘Either way, it’s a pretty happy ending for Sky shareholders given the tremendous rise in the value of their investment as a result of this bidding war.’
Among the fund managers to have built up big stakes in Sky are Crispin Odey, who holds the stock in a number of Odey Asset Management funds he runs.
But the broadcaster has struggled for backing from the majority of major UK mainstream equity funds. Among those funds that do hold meaningful positions is the £76 million Revera UK Dynamic fund managed by Stephen Grant and Glen Nimmo. Sky is their largest holding, at 5.7% of the fund.
There have only been three other takeover situations dealt with by auction since 2007, including the £6.2 billion sale of Anglo Dutch steelmaker Corus to India’s Tata Steel (TISC.NS), according to Reuters.
'Given that Comcast's bid already values Sky in the region of £26 billion to £27 billion, we could see a record being set for an auction in the UK,' said David Madden, market analyst at CMC Markets UK.
'Sky is in demand for several reasons; their broadband and phone businesses are performing well, but it is their 23 million subscribers for pay TV that is of real interest to the bidders.
'The rise of Netflix (NTFLX.O) and Amazon Prime has forced others in the entertainment industry to up their game. Both companies have poured billions of dollars into content and other players are scrambling to catch up.'