FOX Fox Corporation

By Keach Hagey in Sun Valley, Idaho, and Chip Cummins and Ben Dummett in London 

The battle for control of European pay-TV giant Sky PLC heated up Wednesday, with 21st Century Fox raising its bid and cable giant Comcast Corp. quickly countering later in the day, the latest jockeying in a cross-Atlantic media deal showdown.

Comcast raised its offer for Sky to GBP14.75 per share, valuing the company at $34 billion. That is a 5% premium to an offer Fox announced earlier Wednesday and 18% above Comcast's earlier bid. Comcast said its latest offer was recommended by Sky's independent directors.

The fight for Sky could impact the broader fight between Comcast and Walt Disney Co. to acquire most of Fox's entertainment assets. Depending on how the auction for Sky plays out, Comcast could decide to focus its efforts on the European operator and drop its pursuit of Fox's assets, a person familiar with the matter said.

Fox already owns 39% of Sky and is vying to consolidate ownership. Earlier Wednesday, Fox lifted its bid to purchase the rest of the company by more than 30% to GBP14-a-share, valuing Sky at $32.5 billion.

Fox separately has put up for sale entertainment properties including its Hollywood movie and TV studio, regional sports networks and a stake in streaming service Hulu. That deal also would include its Sky holding and other international assets.

Disney is currently in the lead for the Fox assets after reaching an agreement to pay $71 billion in cash and stock, topping a $65 billion all-cash offer from Comcast.

The role of the U.K. Takeover Panel, a regulatory body that polices corporate deal-making, is creating an unusual dynamic in the bidding war. As Disney and Comcast bid higher for the package of Fox assets, the implied value of Sky also rises, forcing both sides to raise their bids for Sky.

"You are basically bidding against yourself," said the person familiar with the matter.

The panel could force Fox to raise its bid further, based on a calculation of Sky shares derived from the Disney offer. The panel has said it would make a ruling on the matter, but didn't say when.

If Comcast winds up only acquiring Sky, the company believes it would make strategic sense. "It's basically a mini-Comcast-NBCU," the person familiar with the matter said, referring to Comcast's purchase of NBCUniversal, which created a mix of distribution and content assets like those that Sky owns.

Before Comcast's latest move, Fox had said Sky's independent directors agreed to its new offer. Fox launched its bid for all of Sky more than 18 months ago. Since then, the deal has been embroiled in a U.K. government review, which was expected to draw to a close later this week.

Sky is one of the crown jewels of Rupert Murdoch's media empire. It could help both Disney and Comcast compete with tech giants like Netflix Inc. Sky produces its own content, while its satellite and broadband offerings reach millions of European households. Both Disney and Comcast view Sky as a route to expand their media and distribution channels overseas.

Under the terms of Fox's latest bid, the company would have the option to lower the threshold of shareholder support required to approve the deal to just over half. At the moment, it requires support from 75% of Sky's non-Fox shareholders.

The deal, though, continues to keep the door open for a more streamlined approach -- should the two sides decide to change the structure under U.K. law. Such a change would allow a simple majority of all shareholders to wave the deal through.

A number of hedge funds, including American activist investor Elliott Management Corp., have bought into Sky, and would likely oppose any bid they felt undervalued Sky.

The government had been weighing for months whether Fox's consolidation of Sky -- which operates a popular news channel in the U.K. -- would constitute an overconcentration of ownership among British news media. Mr. Murdoch and his family are major shareholders in 21st Century Fox as well as News Corp, which owns several large U.K. newspapers. News Corp also owns The Wall Street Journal.

The U.K. culture minister has indicated a separate deal by Fox to sell Sky News to Disney would be sufficient in preventing any overconcentration of ownership.

Fox said it had obtained previous consent from Disney for the higher offer. Fox will take on larger debt to fund the deal. That liability will ultimately fall to Disney, assuming it completes its deal for Fox.

Mr. Murdoch also hedged his bets to some extent. Fox said that in the event the Disney and Fox deal falls apart because of regulatory issues, Disney will pay Fox GBP1 for every share of Sky that Fox buys as part of Wednesday's higher offer. That caps Fox's real exposure to GBP13 a share, should it not end up being acquired by Disney.

Write to Keach Hagey at keach.hagey@wsj.com, Chip Cummins at chip.cummins@wsj.com and Ben Dummett at ben.dummett@wsj.com

(END) Dow Jones Newswires

July 11, 2018 18:45 ET (22:45 GMT)

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