Sky Auction Is Biggest Test for 50-Year-Old Takeover Body

(Bloomberg) -- The future of British broadcaster Sky Plc will be decided with help from an influential body founded half a century ago to bring more discipline to M&A battles.

The Takeover Panel is stepping in as the fight between Comcast Corp. and 21st Century Fox Inc. for Sky heads to an auction starting later on Friday. Staffed mostly by financiers, corporate executives and lawyers, the Panel symbolizes Britain’s cultural hostility to state intervention in business, although since 1986 its decisions can be put to review by the judiciary.

The stakes are high as the U.S. media giants go head-to-head for the 27 billion-pound ($36 billion) pay-TV company and arbitrage funds bet heavily on the outcome. The panel needs to get the best outcome for Sky shareholders.

The highest offer so far, from Comcast, is already 87 percent above Sky’s price before Fox made its first approach in December 2016. Sky’s stock -- currently above Comcast’s 14.75 per share bid -- shows investors expect the auction to yield an even richer result. Sky shares closed unchanged at 15.8 pounds in London on Thursday.

Auctions don’t always lead to higher bids, though, as some of the rare, recent examples show:

Corus Group Plc (2006)

  • Bidders: Companhia Siderurgica Nacional SA (CSN), Tata Steel Ltd.
  • Auction Structure: Single-round, open auction over one day 
  • Outcome: India’s Tata Steel acquired the Anglo-Dutch steelmaker for $12 billion after bidding the value up 18 percent during the auction. The Indian company struggled to make the acquisition pay, plagued by cheap Chinese imports, overproduction in Europe and high costs. Tata is now merging its European steel activities with those of German rival ThyssenKrupp AG.

Imprint Plc (2008)

  • Bidders: Hydrogen Group Plc, OPD Group Plc, Premier Group
  • Auction Structure: Open auction of up to three days
  • Outcome: None of the parties changed their bids and Premier won with a full cash offer for the recruitment consultancy

Enodis Plc (2008)

  • Bidders: Manitowoc Co. and Illinois Tool Works Inc.
  • Auction Structure: One-day, single-round, sealed bids
  • Outcome: Manitowoc prevailed, offering a 12 percent premium to the highest bid before the auction, paying $2.7 billion. The Wisconsin-based crane maker later struggled to manage its debt burden.

QXL Ricardo (2005)

  • Bidders: Venture capital firm Florissant and Tiger Acquisition, a management buyout vehicle
  • Auction Structure: Single-round, open auction over one day
  • Outcome: Florissant did not revise its offer and Tiger only changed the value of one unit. Neither bid fully succeeded

(Sources: Olivetree Financial, Bloomberg News)