By Kate Holton and Maiya Keidan
LONDON (Reuters) - Sky <SKYB.L> shares leapt to an 18-year high on Thursday as investors bet a transatlantic battle for the European pay-TV group had further to run, after Comcast's $34 billion (25.73 billion pounds)bid trumped an offer from Rupert Murdoch made just hours earlier.
Comcast <CMCSA.O>, the world's biggest entertainment group, said on Wednesday it had the backing of Sky's independent directors for a 14.75 pounds-per-share offer that came just 16 hours after Murdoch's 21st Century Fox <FOXA.O> bid 14 pounds.
The speed with which Comcast's Brian Roberts counterbid shows how determined he is to buy Britain's Sky, which broadcasts sports, films and TV shows to 23 million homes across Europe.
Sky's shares rose to as high as 15.41 pounds on Thursday and were trading at 15.34 pounds in mid-morning, valuing it at 26.4 billion pounds - or $35 billion - as investors bet the bidders would have to pay more to secure victory.
"This thing has gone from 10 pounds to 15 pounds in seconds, so most people have got vertigo on this one," said Crispin Odey, a top 20 Sky shareholder. "You need a finale at the end of a great bull market and I think Sky is going to be that finale.
"It's got legs."
Sky's shares are up 95 percent since Fox made its first bid in 2016, and have risen 55 percent in the last year.
The fight is part of a bigger battle being waged in the entertainment industry as the rapid growth of Netflix <NFLX.O> and Amazon <AMZN.O> force the world's traditional media giants to spend tens of billions of dollars to keep pace.
Comcast and Walt Disney <DIS.N> are locked in a separate $70 billion-plus battle to buy most of Fox's assets, which would include Sky, and Disney is backing Murdoch in his pursuit of the British company.
Murdoch already owns 39 percent of Sky, which he helped to launch.
The standoff pits the industry's biggest names against each other, with Roberts, the Murdoch family and Disney's Bob Iger engaged in a multibillion-dollar game of chess to reshape the global entertainment business.
The three are at a tech conference in Sun Valley, Idaho.
WINNER TAKES ALL?
Analysts are divided as to who will emerge triumphant.
Jeff Wlodarczak at Pivotal Research Group said Comcast may succeed in winning Sky but lose out on Fox to Disney.
Richard Greenfield at BTIG said, however, he thought Disney needed to buy Sky to secure a direct relationship with customers in Europe so it could sell them its vast range of programming.
"Is Disney willing to let Sky go? Or will they crush Comcast on both continents?" Greenfield said in a note.
"We continue to believe that if Comcast really wants to own Sky, their best way to do it is by acquiring the Fox assets – winner takes-all was always the scenario that appeared most likely to us."
Shareholders in Fox will vote on Disney's $71 billion bid on July 27.
Comcast, which made a $65 billion all-cash offer for the Fox assets last month only for Disney to raise its bid, would need to return before that date if it is to give investors enough time to consider its bid.
That means the next instalment of this drama is likely to move to the United States
"It's not clear to me that Disney would allow Comcast to get Sky at 14.75 pounds in order to definitively get hold of Fox when they are really in the driving seat," a London-based hedge fund manager with shares in Fox and Sky told Reuters.
A second event-driven fund manager invested in Sky questioned whether Comcast was seeking to force Fox and Disney to do a side deal and sell it some Fox assets in order to end the bidding war.
"For Comcast bidding for the whole of Fox it's now too expensive, so they're focusing their bidding efforts on Sky," the fund manager said on the condition of anonymity.
"And because Murdoch and Disney are determined to take control of Sky, they will have to reach an agreement with Comcast in relation to other Fox assets."
In Britain, a 60-day timetable is set in motion once the second of the two bidders has published its offer document, according to rules set by Britain's Takeover Panel.
If there are still two live competing bids by day 46 of the timetable, the Panel typically runs a 5-day auction process to resolve the situation.
For now, investors are waiting to see what Murdoch will do next. Fox released a terse statement late on Wednesday saying it noted Comcast's offer. The group received regulatory approval to buy Sky from the British government on Thursday - almost 20 months after it requested it.
The government had repeatedly delayed its approval for fears that Murdoch, the owner of two of the biggest selling newspapers in Britain, would control too much of the media.
Murdoch helped to launch Sky in 1989, building it up to be Britain's dominant pay-TV provider through its ownership of Premier League soccer, U.S. drama and films. It now offers satellite TV in Ireland, Austria, Italy and Germany, and streaming services in Spain.
His son James is CEO of Fox and chairman of Sky.
"Investors are now close to doubling their money as a result of the bidding war for Sky," Laith Khalaf, a senior analyst at Hargreaves Lansdown said.
($1 = 0.7571 pounds)
(Additional reporting by Paul Sandle, Ben Martin and Pamela Barbaglia; Editing by Mark Potter)