The Battle Between Comcast and Disney Has Moved to London. This Rule Is Why.

Twenty-First Century Fox finally got clearance on July 12 from Britain’s culture secretary to pursue its takeover of Sky, after 18 months of trying. The decision came hours after Comcast seized the lead in the bidding for the European satellite broadcaster by offering £14.75 a share. Yet it’s a different British regulator, the country’s Takeover Panel, which may have made Sky — and not Fox itself, which has drawn takeover bids from the Walt Disney Company and Comcast to expand their media empires — the center of the biggest media takeover battle today. But it could also lead to a peaceful compromise.

Here’s where Britain’s merger rules come in. A provision known as the “chain principle” essentially says all shareholders in a company must be treated equally. In this case, the concern is that Fox’s shares of Sky would be valued higher than those of other shareholders.  The chain principle first became a factor in April, when the Takeover Panel ruled that if Disney succeeded in buying control of Fox, it would need to buy out the rest of Sky at £10.75 a share — assuming that Comcast didn’t win. Things got more complicated in June when Disney raised its bid for Fox to $71.3 billion, presumably raising the valuation of its stake in Sky as well. The Takeover Panel hasn’t yet decided whether the chain principle means that Disney would need to pay a higher price to buy out the rest of Sky. The chain principle could affect Comcast as well. What the cable giant may be wary of is essentially bidding against itself: Any new bid that it makes for Fox might mean paying more for Sky as well, making the whole effort more expensive.