Comcast and Fox goes Head to Head in Blind Auction
Comcast and Fox to settle battle for Sky with a Blind Auction.
Giant U.S. media companies, Comcast and Fox, are both looking to acquire British broadcaster, Sky. Acquiring Sky means an opportunity to diversity outside of North America and reach oversea consumers directly. Sky is thought to have 23 million customers across Europe and currently has a market stock value of $35 billion. To settle this battle, Comcast and Fox will head into a blind auction, where bidders submit a secret offer to a third-party arbiter and the best offer wins.
As we learned from class, this kind of blind auction is similar to First Price auctions, where bidders send in a bid and the highest bidder wins and pay their bid. If acting rationally, neither Comcast nor Fox should bid more than what they value Sky to be. Using the current stock market price of Sky, this means neither party should pay more than $35 billion. This has been true so far, as the highest offer for Sky is $34 billion by Comcast.
However, because of the possible growth of Sky after it is acquired by one of these giants, the value of Sky is likely to go up in the future. Thus, it is hard to say what each party’s personal value for Sky is and thus hard to say what each party will bid. I believe Sky is making a great move by holding a blind auction. Since both Comcast and Fox have huge stakes and big plans with Sky — as this battle has been going on for almost 2 years — neither will want the other to win. Even though neither party will want to pay any more than it has to, the highest offer is already at 34 billion, so there is a very high chance that the winning bid will be more than $35 billion, the current market value of Sky.