Fox, Comcast Fight for Sky Could End in Sealed Bids
https://www.wsj.com/articles/blind-auction-complicates-bidding-for-sky-1537522201
https://www.axios.com/comcast-prevails-fox-settlement-auction-sky-0ae9ca28-09b9-440c-9e7e-70f5272c49c9.html
Not only do auctions take place for collectors’ items and such merchandise, they are an essential tool for determining the winners of mergers and acquisitions. In the recent Media Merger frenzy due to fear of the future and to combat companies such as Google, Netflix, and Facebook, the media company, Sky, has become the latest and hottest target for such an acquisition. Both Fox and Comcast has indicated interest, and had announced bids to purchase Sky shares. However, due to the high demand and resultant competition, the public declaration of bids in essentially an ascending-bid auction (not sealed) has not lead to concrete results. Thus, the three parties had agreed to a sealed bid first price auction instead, to settle the two-year long battle. Such an auction, though common for lower-stake deals, such as for Major League Baseball players and telecommunications’ airwave rights, is uncommon for such a large scale deal. However, it was deemed necessary to be the final settlement of the previously inconclusive battle. Ultimately, Comcast won, with a bid of £17.28 per share, topping Fox’s £15.67 per share bid.
This topic directly relates to the section on auctions in class, as auction dynamics and game-theory strategies for the highest payoff/dominant strategy is involved in a complex level in these proceedings. The transparent bids submitted by the different parties were tools for both parties to gauge their own interest in the target, as well as the opponent’s true value. The bids already submitted, as well as understanding of each others’s drive for Sky shares, were crucial information to determine the final bid each company submits in the sealed-bid auction. Each company must have had experts in the field gauging a range of possible bids from the opponent, and choosing their own valuations depending on this – the crux of the matter was to not end up bidding too high and winning the auction with essentially a negative payoff – when one could have won by submitting a much lower bid. As this is not a second-price auction, it is not a dominant strategy to bid true value, and one should shade their bid depending on the opponent’s possible values. From the results, however, it seems that while Comcast won, their final bid of £17.28 per share was quite a bit higher than Fox’s £15.67 per share bid, and the company could have done better by shading down its bid even further. It seems that Comcast has overvalued Fox’s true value for the asset. But of course, as long as Comcast has not exceeded its own true value for the acquisition, the result is still positive.