UK clearance for Fox-Sky deal sets the stage for fresh bidding war

Giving a new twist to one of the most fiercely fought buyout battles the corporate world has witnessed in recent times, the UK government Tuesday granted approval for 21st Century Fox (FOXA) to go ahead with the proposed acquisition of its remaining stake in European pay-TV service provider Sky Plc.

The most likely outcome of the regulatory nod is a re-escalation of the ongoing fight between Comcast (CMCSA) and Fox to acquire Sky. It will also prompt Walt Disney (DIS) to revive its offer to acquire a majority stake in Fox – including Fox’s stake in Sky and the latter’s lucrative sports broadcast rights and movies. Earlier, the deal was challenged by Comcast.

However, British culture minister Matt Hancock gave the approval with a rider – to be able to go ahead with the takeover, Fox should ensure that the news division of Sky is sold to a third entity. If the Rupert Murdoch-owned media giant satisfies that condition, the only factor that could come in the way of the deal is the bid price.  Making things easier for Fox to resolve that issue, Walt Disney has already offered to acquire Sky News.

To be able to go ahead with the takeover, Fox should ensure that the news division of Sky is sold to a third entity

Had it not been for Comcast’s unexpected counterbid for Sky, the latter would have become a part of Fox much earlier. So, as long as Comcast continues to fight, the bid price would still matter to both the parties, though Fox is the preferred choice for Sky shareholders.

There is enough reason to believe Comcast would remain in the fray for the time being, especially in the wake of the UK government acknowledging its $29-billion offer to acquire Sky.  Moreover, the Comcast bid might not meet with any anti-trust hurdle due to the company‘s limited presence in the European market, which is not the case with Fox.

According to experts, Sky is so strategic a target for the bigger firms that it has the potential to decide the future of the global telecommunications industry.

It is widely speculated that a consolidation wave would sweep the communications and media sector globally in the coming months, as traditional broadcasters and cable TV service providers face increasing threat from video streaming firms like Netflix (NFLX) and Amazon (AMZN).