(Bloomberg) -- Comcast Corp. lobbed the ball back to 21st Century Fox Inc. and Walt Disney Co. in the battle for Sky Plc this week, starting a bidding war for Britain’s biggest pay-TV company.
With Comcast formalizing its 22 billion-pound ($31 billion) offer for Sky on Wednesday -- 16 percent above Fox’s existing bid -- investors are expecting a response from Fox or Disney, which has a $52.4 billion deal to buy most of Fox. Complicating matters is an expected regulatory decision on Fox’s bid and the question of whether Comcast would face a similar U.K. review. Here’s what could come next in the takeover fight:
1. Fox Learns Its Regulatory Fate
Fox still needs approval from U.K. regulators for its December 2016 bid for Sky, and the competition watchdog is due to give its findings to the British government by May 1. The Competition and Markets Authority is looking at whether the Fox-Sky deal would give Murdoch, who owns several U.K. newspapers, too much influence over the country’s media. Culture Secretary Matt Hancock will have the final say on whether to clear the takeover by mid-June.
2. Fox Raises Its Offer?
If regulatory approval is sealed and in consultation with Disney, Fox will then have to decide whether to boost its 10.75 pounds per share offer for Sky. Sky’s independent directors withdrew their recommendation of Fox’s offer following Comcast’s 12.50 pounds-per-share rival bid, suggesting a Fox top-up will be needed if it’s determined to buy Sky. Fox, which already has a 39.1 percent stake in Sky, could come back with a bid of up to 13.75 pounds per share, Liberum analyst Ian Whittaker wrote in a note to clients.
3. Could Disney Swoop in for Sky?
It’s unclear. While Fox’s bid for Sky is still in play, it might be unlikely, according to Neil Campling, an analyst at Mirabaud Securities in London. Fox is far advanced in the regulatory approval process, so Disney could be happy to ride on its coattails and pick up Sky as part of the potential future Disney-Fox merger.
However, Disney might be drawn into putting in its own offer for Sky if Fox’s bid is blocked by the U.K. government. Also, if Fox has to pay significantly more to beat Comcast to Sky, that could complicate Disney’s purchase of Fox. Disney may decide to split up the two deals, buying Fox and Sky separately, said Alex DeGroote, an analyst at Cenkos Securities.
4. Comcast Seeks Regulatory Approval
Comcast also still needs approval from regulators in Europe. Assuming it files a bid with the European Commission shortly and there is no additional scrutiny in the U.K., Comcast could get the green light as early as June. Any regulatory delays could push its approval to later in 2018. There’s a debate as to whether Comcast should face a regulatory review in the U.K. Comcast CEO Brian Roberts argues against it, while a U.K. lawmaker influential in shaping the regulatory framework for media mergers is among those suggesting it should.
5. Sky’s Board Decides
Sky’s independent directors will try to negotiate the best deal for shareholders and will likely make a new recommendation once Comcast and Fox table their final bids. Their recommendation, which will be influential with passive investors such as tracker funds, will be based on factors such as price and prospect of regulatory clearance.
6. Shareholders Vote With Their Feet
Once bids are finalized and have received regulatory approval, Sky’s shareholders will have to vote with their feet. Do they sell to Comcast or Fox? Comcast needs to acquire 50 percent plus one share of Sky to complete its acquisition. Fox’s offer needs approval from three-quarters of Sky’s independent shareholders, which represent about 45 percent of all shares.
©2018 Bloomberg L.P.