Comcast offers $65 billion to lure Fox from Disney bid

14 June 2018: Comcast Corp (CMCSA.O) offered $65 billion on Wednesday to lure Twenty-First Century Fox Inc (FOXA.O) away from a merger with Walt Disney Co (DIS.N), setting up a bidding war between two of the largest U.S. media companies with its 20 percent higher offer.

Comcast Chief Executive Brian Roberts said he was highly confident regulators would allow Comcast to acquire most of Fox’s media assets after AT&T Inc’s (T.N) court victory on Tuesday, which allowed it to buy Time Warner Inc (TWX.N) for $85 billion.

The fight to win Fox’s assets is shaping up to be a summer blockbuster starring well-known media moguls, led by Rupert Murdoch who built Fox into a global media empire. Comcast’s Roberts, who led a failed bid for Disney in 2004, now faces off against Disney Chief Executive Robert Iger, whose own dealmaking has added heroes from Pixar, Star Wars and Marvel comics to the home of Mickey Mouse.

Fox’s board will now have to decide whether Comcast’s offer beats Disney’s. If Fox prefers Comcast, Disney will have five business days to respond.

Comcast may have a tough time winning over Fox’s largest shareholder, the Murdoch family. They own a 17-percent stake and would face a multi-billion dollar capital gains tax bill by accepting an all-cash offer from Comcast, tax experts previously told Reuters.

Fox shareholders will vote July 10 on the Disney transaction but the company could postpone the meeting, Fox said in a statement.

Some analysts see difficulties for Comcast-Fox, which would add Fox’s movie and television studios to Comcast’s NBC Universal, but Roberts said in a letter to Fox that he would offer the same conditions as Disney and promised to fight for the deal in court if necessary.

Comcast is expected to lead a wave of traditional media companies trying to combine distribution and production to compete with Netflix Inc (NFLX.O) and Alphabet Inc’s (GOOGL.O) Google. The younger firms produce content, sell it online directly to consumers and often offer lucrative targeted advertising.

A merger between Fox and Comcast would create a company with a stable of well-known media brands and franchises, such as the X-Men superheroes. A combined company would hold the rights to air Fox’s long running TV show “The Simpsons”, the U.S. rights to the Olympics and Premier League Soccer.

Fox’s international assets such as Star India appeal to both Disney and Comcast, which want to expand their global presence.

Major sports and news assets including Fox News, Fox Business Network and Fox Sports would be spun off into a separate company.

Shares of Comcast, Fox and Disney were barely changed in after-hours trade.

Comcast in a statement outlined an offer that was similar to Disney’s, including a commitment to the same divestitures. It said that it would go to court and fight if the Justice Department tried to block the deal.

Comcast offered $35 per Fox share for the media assets, compared with Disney’s stock offer, worth $29.18 per share at the close of trade on Wednesday.

Comcast offered a $2.5 billion reverse termination fee if the deal did not go through, the same as Disney. It also offered to pay Fox’s $1.525 billion breakup fee owed Disney, if Fox went with Comcast.

Comcast said it intended to pursue its $30 billion acquisition of Sky Plc (SKYB.L) in parallel with its Fox bid. Comcast bid for Sky in April, after Fox’s bid for the remainder of European pay-TV group it did not already own was delayed by regulators.

Fox in a statement said it had received the proposal and would review it.

Justice Department lawyers who tried to stop AT&T’s $85 billion deal expect consumers will lose out as bigger companies raise prices, and some lawyers saw that as a concern in a Comcast-Fox deal which would put two movie studios and two major television brands under one roof.

“One cannot ignore the fact that there’s less independent content to go around,” after the AT&T deal, said Henry Su, an antitrust expert with Constantine Cannon LLP.

Still, the AT&T court fight gave Comcast valuable information about how to structure a Fox deal, said David Scharf, a litigation expert with Morrison Cohen.

Disney itself has “surgically” structured a transaction that “might be doable,” avoiding Fox Broadcasting and big Fox sports channels, U.S. antitrust chief Makan Delrahim said last week.

“I don’t think either will have a significant advantage over the other,” given that both Disney and Comcast seem motivated to divest what they need to win a deal with Fox, said Ketan Jhaveri, a former Justice Department attorney who served on the telecommunications task force.