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$38.8 Billion decided in closed auction bid for Sky PLC

https://www.wsj.com/articles/comcast-wins-bid-to-acquire-sky-1537640587

https://www.wsj.com/articles/blind-auction-complicates-bidding-for-sky-1537522201?mod=hp_lista_pos1

https://www.wsj.com/articles/comcast-fox-to-settle-35-billion-takeover-battle-for-sky-in-weekend-auction-1537435073?mod=article_inline

A very brief description of this piece: companies are competing to but Sky PLC- a pan-European, British media and telecommunications company.

The  conclusion of this entire 21 month long fiasco was Comcast submitting a winning sealed bid for  Sky at $22.60 per share- in other words- Comcast will now gets to pay $38.8 billion dollars for the legal ownership of Sky PLC. The game-theory aspects involved in this transaction were overseen by “Britain’s Takeover Panel,” a regulatory body that polices corporate deals. This regulatory body decided that, unless one of the two bidding parties (the two parties were Fox/Disney and Comcast) submitted a “best and final offer” by September 22nd- the process would end with a weekend-long bidding process (maximum of three rounds) with the final round being a first price sealed bid auction. Neither company submitted a “best and final offer” by September 22nd- and it went down to the third round. In this class we discussed many different types of auctions and the best corresponding strategy- open bid, closed bid- first price, second price even third price. However this auction had a quirk that we never touched on in class. One of the parties bidding already owns 39% of what its bidding on. Earlier this year Disney bought a chunk of Fox’s assets for $71 billion dollars- a 39% stake in Sky was part of that $71 billion. This kind of throws a wrench into how we would analyze this process as students of info 2040.

On one hand- the Fox/Disney team wanted to purchase the rest of Sky so they could better integrate the business processes and get maximum value out of this corporate merger.  On the other- Fox/Disney would have  been more then happy to give up their stake in Sky if Comcast was willing to pay a large premium. The Fox/Disney team ultimately submitted  a bid of $17.95 in the final sealed round. I think this represents the minimum value they would have sold Sky at. This was the final round so Comcast couldn’t react to this exact bid- meaning this was their final chance to show their own personal valuation of Sky. This bid was over 20% lower then Comcast’s bid. Did Comcast over pay? Did the Fox/Disney team miss something in their own evaluation? The market is still reacting to this entire ordeal so the final verdict isn’t out- But one thing that is for certain- is that for the next couple of years MBA students all over the world will reading this case study which effectively ends with a sealed envelope containing a $38.8 billion dollar check being handed over to a British government official.

 

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