A game of pass the envelope on Saturday in London will settle the $47 billion battle for control of Sky Plc, a key company in the Murdoch family’s fortune. In fact, the battle of the envelopes will be the biggest game in Britain tomorrow – larger that Theresa May’s home fixture against the EU, or a trio of Premier League games involving heavyweights, Liverpool, Man United and Man City.
Sky’s fate will be decided in three rounds of pass the envelope from 21st Century Fox and Comcast that will culminate with a final offer of at least £26 billion ($A47.2 billion).
Because neither Fox or Comcast will declare their offers final (to do so first would effectively hand control of Sky to the other bidder which would lift its price). That’s despite Comcast’s offer of £14.75 a share being marginally higher than the £14 a share offer from Fox. So to settle this intransigence, the London-based Takeover Panel has decided to settle the battle by a sealed envelope auction in London tomorrow.
It is a farcical way of settling drawn takeover battles involving mostly adult males peculiar to Britain.
It is also antithetical to the normal Murdoch way of settling a deal by blowing its rivals out of the water with a huge offer – as it did in 2007 when it overpaid by offering $US7.5 billion for the Dow Jones Co (and the Wall Street Journal) and had then written that cost down by half within two years.
This time round its first offer price of £10.75 was well above the market and looked a knockout. But the bid was delayed by justifiable fears about the Murdoch influence in UK politics and media through its newspapers (The Sun, The Times and Sunday Times) and the prospect of 100% control of Sky News.
Then the Murdochs decided time was up for old-fashioned TV and film because of the rise of streamers like Netflix and decided to sell off unwanted assets – Disney and Comcast bid, Disney won eventually because it offered shares to ease the Murdochs’ tax problems. Comcast then switched its attention to the battle for Sky and overbid Fox twice. Now Comcast wants a win and the Murdochs do not want to pay any more – hence the stalemate that neither group of adults have wanted to break by blinking and declaring their offer to be ‘final’.
So UK Takeover Panel announced last night (Thursday) in London announced that it would take control of the process and wrap it up on Saturday. Comcast and Fox, along with the Disney, have all agreed to an up-to three-round process.
The panel said: “The auction procedure will consist of a maximum of three rounds which will all take place on 22 September 2018. In the first round, only the offeror with the lowest offer as at the commencement of the auction (or, in the event of both offers being at the same price, the last offeror to revise) may make an increased bid. In the second round, only the offeror that was not eligible to make a bid in the first round may make an increased bid (and it may do so even if no increased bid was made in the first round by the other offeror).
If the auction procedure has not concluded after the second round (which it will if no increased bid is made in the second round), there will be a final round, in which both offerors may make an increased bid.” That’s Fox first in round one, then Comcast in round 2, even if Fox doesn’t lift its bid (making Comcast the winner). If both lift their prices, the final rounds will see two envelopes with final prices. Now that’s a battle of nerves.
This will be only the third auction run by the Takeovers Panel since 2000. Steelmaker Corus was sold to Tata by auction in 2008, while the sale of the Canary Wharf development settled through the procedure back in 2004.
The result will be announced on Saturday evening in London (early Sunday morning in Australia). A very British way of settling a dispute and one so very un-Murdoch that it is amusing.
