The fight for Sky might come down to a rare sealed auction this weekend

Comcast’s
Brian Roberts, Fox’s Rupert Murdoch, and Disney’s Bob Iger are
fighting for Sky.
Sky; Michael
Loccisano/Getty; Ethan Miller/Getty; Justin Sullivan/Getty; Jenny
Cheng/Business Insider

• A sealed one-day auction between Comcast and Fox for
  Sky might commence Saturday.
• These types of auctions are extremely rare with only
  two in the past decade.
• Analysts predict that Comcast will win in a bidding war
  for Sky.

The battle for British broadcaster Sky may be in its
final days. Comcast and 21st Century Fox, which have
competing bids out for Sky, have until Friday to drop out of
bidding before a larger clash of the media titans begins.

The bidding process may well end after a single-day auction
starting on Saturday, Bloomberg reported, citing
sources familiar with the matter.

The British Takeover Panel has a standard auction timeframe of
five days, and bidding can be sealed or open. One-day sealed
auctions are so rare there have been only two in the past
decade, Morningstar analyst Allan Nichols told
Business Insider.

“This is very rare in UK M&A,” Alex DeGroote, an
independent media analyst, told Business Insider. “And a suitably
dramatic end to this saga.”

A potential bidding war

Once an auction begins there are few potential outcomes,
according to analysts.

Neither company could choose to increase their current bids for
Sky. Comcast’s current offer is £14.75 per share, valuing Sky at
£26 billion ($34 billion), while Rupert Murdoch’s 21st Century
Fox bid is £14 a share.

Or, both companies could bid in an auction. “The market is
betting on a bidding war,” Nichols said. The shares for Sky have
traded much higher than that of either offer, indicating that the
market predicts a competitive bidding process that drives the
purchase price higher.

Both analysts said they expect Comcast to win in an auction
scenario.

“Comcast is overall positioned better to win,” DeGroote
said. “It has saved its firepower for this Sky auction, it has
more balance sheet headroom and it can derive material operating
synergies in a combination.”

A final outcome is that shareholders could reject any offer on
the table. They have until October 6 to do so. If they reject the
offers any future offers would have to be on hold for a period of
six months. 

The battle for Sky is linked to an earlier fight between Disney and
Comcast for some 21st Century Fox assets. In July, Comcast
dropped out of that bidding, allowing Disney to win Murdoch’s
entertainment assets plus the 39% of Sky Fox already owned. If
Fox wins out in an auction, it will control Sky. If Comcast wins,
it will own the 61% not owned by Fox.

Sky is an attractive asset to both Comcast and Disney as
they work to expand their international footprints. The British
pay-TV business serves 23 million customers, mostly
direct-broadcast-satellite subscribers, in the UK, Ireland,
Germany, Austria, Italy, Spain, and Switzerland.

And it has a strong content portfolio with exclusive rights through 2020 to
run HBO shows— like Game of Thrones and Westworld — across
Europe, and
 has the majority of Premier League
football TV rights and exclusive rights to the German
Bundesliga.