Hedge funds with a stake in Sky, the British media and telecom giant, will soon know the victor of a bidding war for its assets that’s been playing out for months.
British securities regulators have mandated that an auction for Sky’s assets, with Comcast and Twenty-First Century Fox as bidders, be completed on Saturday, September 22. Britain’s Takeover Panel said in an announcement Thursday that the auction will involve as many as three rounds of bidding if “a competitive situation” still exists at 5 p.m. in London on September 21.
This is considered a rare move taken by the Panel, which regulates mergers and acquisitions.
In December 2016, Fox offered to acquire the 61 percent of Sky that it did not already own. However, regulators held up the deal, and in late February, Comcast offered to buy Sky for $31 billion. Fox then lifted its bid for Sky to more than $32 billion in July, prompting Comcast to offer more than $34 billion.
U.S. investors are not required to include their position in Sky in their quarterly 13F filings since the company’s stock trades on the London Stock Exchange. According to British regulatory filings, several major hedge fund giants hold sizable stakes.
For example, as of July 26, Seth Klarman’s The Baupost Group owned 80.45 million shares, or 4.68 percent of the total outstanding.
As we earlier reported, Baupost posted a 5.1 percent return in the first half of the year, with virtually all of the gains coming in the second quarter thanks in large part to a 44 percent rise in the Sky’s shares and a similar gain from its largest position in Fox.
Paul Singer’s Elliott Management owned 74.4 million shares for a 4.33 percent stake in Sky as of September 17. Most of the shares were acquired from cash settled derivatives, according to the filing.
Farallon Capital Europe, meanwhile, owned 39.36 million shares of Sky, or 2.28 percent of the total as of July 25. All of its shares were acquired from cash settled derivatives.
Meanwhile, at the end of May, Sky was the largest long position of Falcon Edge Global Funds, accounting for 11.6 percent of total assets, according to the hedge fund’s May exposure report obtained by Institutional Investor. This position is roughly the same today, according to a person familiar with the fund.
“Sky is a scarce if not the only scale asset available to Comcast or Disney to give a leg up in the battle against Netflix and Amazon in OTT (over the top) content and distribution with 23 million paying subscribers with Tier 1 content across Europe,” Falcon Edge founder Richard Gerson said in an emailed statement Thursday.
Other Sky investors include Crispin Odey’s Odey Asset Management, according to Reuters, which reported in June that Odey earlier said Sky should easily fetch 18 pounds per share. According to the New York Post, Elliott says the company is worth more than $34 billion. Sky’s shares closed Thursday at 15.80 pounds (about $21) each.
The Takeover Panel said that Comcast and Fox must announce their latest offers on September 24.