Jeremy Darroch, CEO of Sky, on the center stage during day three of the 2015 Web Summit in Dublin, Ireland. Stephen McCarthy | Sportsfile | Getty Images

Two of America's largest media companies are about to settle a bidding war to buy a coveted overseas competitor. Twenty-First Century Fox and Comcast are going head to head in London over the weekend at a takeover auction for British broadcaster Sky. The deal will likely set Sky's new owner back by about $36 billion. Sky shares are currently trading well above Comcast's last takeover offer price of £14.75 ($19.46) a share, which is the largest amount that has been offered so far. Fox's latest offer trails behind at £14 per share. Not to mention the elephant in the room: Disney. The entertainment giant may well become Sky's outright owner if Rupert Murdoch's Fox emerges from the fight victorious. Disney is on track to acquire assets of Fox, and that includes a 39 percent stake in Sky. Sky's stock price was last trading at around £15.87, which gives it a market capitalization of £27.19 billion, or $35.95 billion. Gervais Williams, U.K. fund manager at Miton Group, which owns Sky stock, said the increase of Sky's share value meant investors were "assuming something around the £16 (per share) level."

Williams said Friday that he believed Sky would remain a separate entity and brand, no matter who its new owner is. "I suspect it will continue to have its own identity because the business itself is a European business in its principality, the bidders are mainly U.S.-based," he said on CNBC's "Squawk Box Europe." "From that point of view, I think they are going to continue to have the two different operations with their own market positions." Sky is one of the biggest pay-television providers in Europe, with nearly 23 million pay-TV subscribers across the continent. The company also offers internet broadband, owns the television streaming service Now TV and has the rights to broadcast Premier League soccer games. "We think the current share price is reflecting the next move," Guy Peddy, head of European telecom research at Macquarie, said Friday on CNBC's "Street Signs Europe." "What we would say is the final move, probably tomorrow evening some time, we think it probably could be closer to £16 or even up to £16.50 as we think is probably the fullest price for someone to pay," he added.

The auction process broken down

The auction process began Friday at 5 p.m. London time (noon ET). As laid out by the U.K.'s takeover watchdog on Thursday, that process will take the form of three bids. Each must be submitted in British pounds, the Takeover Panel said. In the first round, the company with the lowest bid — in this case Fox — can make an increased bid for Sky. CNBC owner Comcast then has the chance to increase its bid in the following round. If the auction procedure has not been concluded during that second round, it is then carried on into a third and final round. During the evening of Saturday, the auction will come to a close and no more bids can be submitted. It's a highly unusual procedure for a deal as notable as the Sky acquisition. Takeover auctions are normally reserved for commercial transactions. Macquarie's Peddy said all eyes will be on Fox as the auction begins because the company must launch the first salvo and, consequently, determine whether Comcast decides to raise its own offer. "I think both players will probably argue they are in a good place," he said. "I suppose you could argue that Fox have to kick it off." "So how they come out of the trap, so to speak, in the first round will dictate the level the bidding goes. Clearly, Comcast then have the ability to follow and then there's a full and final offer."