There are reports that the battle between Comcast and Twenty-First Century Fox for Sky could end up in an auction next month by Britain’s takeover regulator in what would be a rare step to intervening in an acquisition battle. The aim is to bring an end ot the bidding war that is ongoing between the companies.
Under Britain’s takeover code, when there are two competing bids for a company that is listed on the London Stock Exchange and if none of the bids have been declared to be final by both the companies to remain on the table for consideration, the Takeover Panel possess the power to initiate a formal auction process. The cut off date in this case is September 22.
Since 2007, there have only been three British takeover situations. Those incidents included a 6.2 billion-pound ($8.1 billion) acquisition of Anglo-Dutch steelmaker Corus by India’s Tata Steel.
The abandonment of an acquisition attempt by Royal Dutch Shell for gas explorer Cove Energy in 2012 was another battle that came to an end just before an auction. The abandonment allowed the takeover to be done by rival bidder Thailand’s PTT Exploration & Production who took over Royal Dutch Shell for $1.9 billion deal. That was the last occasion that the Panel invoked the auction procedure.
The fight for acquiring Rupert Murdoch’s British broadcaster Sky is currently being led by cable giant Comcast with its 14.75 pound a share offer that was made last month resulting in a company valuation of Sky of 25.9 billion pounds and this bid has been recommended by Sky’s independent directors.
That bid was more than the 14 pound a share bid that was made by Fox earlier in July seeking to acquire 61 percent of Sky which it does not currently won and that bid is 37 percent more than the original bid by Fox which was 10.75 pound a share. The current share price of Sky is 15.44 pounds.
Fox and Comcast are free to lift their bids at any point up until the Sept. 22 deadline which is the current timetable for a deal. That timeline can be altered by the Panel.
The regulator can step in and start an auction if neither company has relents by then.
An auction process is invoked to bring to an end a protracted bidding war where each of the bidding parties are given an opportunity to put in revised offers in an orderly process which is managed by the Panel. However, this process can also drive up the price of which is ultimately paid by the successful bidder.
“I hope it goes to an auction,” said Crispin Odey, owner of eponymous hedge fund which is a top-20 shareholder in Sky. “Every day I look at that price and think: ‘Why is it not at 18 pounds?’”
(Adapted from Reuters.com)