21st Century Fox has accepted a sweetened, US$71.3-billion (R973-billion) bid from Walt Disney Co for its entertainment assets, outbidding Comcast in a battle for one of the media industry’s biggest prizes.
The $38/share price is about $10/share higher than what Disney offered in December — and $3 above Comcast’s bid from last week. The new agreement also offers more flexibility and other enhancements than the Comcast offer, Fox said on Wednesday.
At stake is a trove of media properties, ranging from The Simpsons to X-Men, that may help fend off the threat from Netflix and other streaming upstarts. Both Disney and Comcast are looking to use the Fox assets to bolster their content and expand overseas.
Disney’s latest offer is a “very aggressive move” by CEO Bob Iger and may make it difficult for Comcast to respond, said Bloomberg Intelligence analyst Paul Sweeney. Comcast’s current bid was already poised to load the company up with debt, and its shares have fallen 18% this year.
“Comcast’s balance sheet may preclude it from bidding much higher,” Sweeney said. “Further hampering Comcast’s ability to respond is its position that it does not want to use its stock in a deal at these low levels.”
Fox shares jumped as much as 6.8% on Wednesday, sending them to a record high. Disney rose about 0.6% as of 9.56am in New York, while shares of Comcast were little changed.
The tussle follows AT&T’s victory over the US justice department in its antitrust battle to take over Time Warner. That outcome is expected to spur a wave of media consolidation, emboldening companies to get more aggressive with deals.
The Disney-Comcast contest will determine who controls much of Rupert Murdoch’s empire, including Fox’s movie and TV studios, television networks such as FX, and multichannel providers like Star India and Sky.
But the two sides aren’t vying for all of Fox. Part of the business will be used to create an entity called New Fox, which will include the highly lucrative Fox News, the sports channels FS1 and FS2, and the Fox broadcasting channel. That operation will be run by Lachlan Murdoch and focus on domestic television, news and sports.
Cash and stock
Disney’s new offer gives Fox shareholders the option to take their payment in the form of cash or stock, up to a 50-50 level. The previous agreement was an all-stock deal, and Comcast’s cash offer was seen as a significant enticement.
Disney also plans to take on about $13.8-billion of Fox’s net debt. That would lift the total transaction value above about $85-billion.
Meanwhile, there’s a separate — yet intertwined — fight for Sky, the British pay-TV company. Fox has attempted to acquire the portion of Sky that it doesn’t already own, but Comcast swooped in with a higher bid.
Sky shares climbed as much as 3.5%, a sign investors expect the Disney deal to help deliver them a higher price.
In any case, Comcast isn’t likely to go away quietly.
Comcast’s current $65-billion cash offer for Fox — along with the potential Sky deal — was already expected to push its debt load to $170-billion, according to Moody’s Investors Service. That leaves CEO Brian Roberts with some tough decisions.
“The ball is now in Brian Roberts’s court,” Sweeney said. — Reported by Nick Turner, with assistance from Joe Mayes, Gerry Smith and Nabila Ahmed, (c) 2018 Bloomberg LP
