Comcast may gatecrash Disney-Fox deal
It is planning a major bid for parts of 21st Century Fox, setting up a battle with Disney
Comcast is asking investment banks to increase a bridge financing facility by as much as $60 billion so it can make an all-cash offer for the media assets that TwentyFirst Century Fox has agreed to sell to Walt Disney for $52 billion, three people familiar with the matter said on Monday.
Comcast Chief Executive Brian Roberts only plans to proceed with the bid if a federal judge allows AT&T’s planned $85 billion acquisition of Time Warner to proceed, the sources said. The US Department of Justice has opposed the AT&T-Time Warner deal over antitrust concerns, and a decision from US District Court Judge Richard Leon is expected in June.
Disney Chief Executive Bob Iger clinched an all-stock deal with Fox Executive Chairman Rupert Murdoch in December to acquire Fox’s film, television and international businesses, giving the world’s largest entertainment company an arsenal of shows and movies to combat growing digital rivals Netflix and Amazon.com.
Comcast, owner of NBC and Universal Pictures, has also made a £22 billion ($30 billion) offer to acquire the 61 per cent stake in European pay-TV group Sky that Fox does not already own. In doing so, it topped an earlier offer for the entirety of Sky by Fox. Last November, Comcast offered to acquire most of Fox’s assets in an all-stock deal valued at $34.41 per share, or $64 billion, a regulatory filing showed last month. Like Disney, Comcast sought to buy Fox's entertainment networks, movie studios, television production and international assets, the filing shows. Fox ended up announcing an all-stock deal with Disney for $29.54 per share. In the regulatory filing, Disney and Fox cited regulatory hurdles
as reasons to reject Comcast’s bid, even though they did not reference it by name. The exact value of Comcast's new bid for the Fox assets is not yet clear, although the $60 billion in new financing indicates it is seeking significant firepower to outbid Disney.
Comcast already has a $30 billion bridge loan to finance its Sky offer. The sources asked not to be identified because the matter is confidential. Comcast, Fox and Disney declined to comment. Fox shares rose 5.13 percent to $39.99 on the news in after-hours trading in New York on Monday. Comcast shares were down 1.5 percent to $31.90, while Disney shares were down 0.5 percent to $102.00.
Murdoch, who owns close to a 17 percent stake in Fox and holds about 40 percent of the voting power, prefers to be paid in stock rather than cash for the Fox assets, because this makes the transaction non-taxable for shareholders, sources have said. It is not clear how receptive he would be to an allcash offer. Last month's regulatory filing also showed that Fox viewed Disney's stock as more valuable than Comcast's, based on historic prices, and felt that a deal between Disney and Fox would generate greater long-term value. The Roberts family controls Comcast through a dual-class stock structure. Comcast's stock has dropped since then, from around $38 to about $32 now, giving the company a market capitalisation of $149 billion.
Disney has committed to share buybacks as a way of returning cash to Fox shareholders. As a result, Comcast sees an opening in being disruptive to the deal by making an all-cash bid, according to the sources. In its deal with Disney, Fox agreed to separate the Fox Broadcasting network and stations, Fox News Channel, Fox Business Network, its sports channels FS1, FS2 and the Big Ten Network, into a newly listed company that it will spin off to its shareholders.