Disney-Fox deal wins antitrust if Fox sells regional sports outlets

Walt Disney Co. won U.S. antitrust approval Wednesday for its planned $71 billion purchase of 21st Century Fox’s entertainment assets, giving the Burbank entertainment giant a leg up in its bidding war with Comcast Corp.

The Justice Department announced that it agreed with Disney and Fox that if the deal goes through, Disney must sell the Fox Sports Regional Networks. Disney will have at least 90 days from the date of closing the transaction to complete this sale, with the possibility of a three-month extension.

The approval is a victory for Disney in its battle with Comcast for one of the media industry’s biggest prizes. Last week, Fox accepted a sweetened bid from Disney, which increased its offer after Comcast’s competing $65 billion bid. The $38a-share price is about $10 a share higher than what Disney offered in December — and $3 above Comcast’s bid.

Comcast is now considering its next steps, including possibly teaming up with private equity investors in its pursuit of Fox assets, a person familiar with the situation said. The Wall Street Journal reported that if the bidding reaches a high enough level — say, $90 billion — Comcast may go to private equity firms or other backers for help. In one scenario cited by the newspaper, a strategic investor could take on Fox’s U.S. assets — including the 20th Century Fox studio and regional sports networks — and leave Comcast with overseas assets.

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 such as Star India and Sky.

Disney and Comcast are looking to use the Fox assets to bolster their content, expand overseas and fend off the threat from Netflix. and other streaming companies. That threat prompted AT&T to buy Time Warner, a deal the government challenged and lost at trial.

Disney and Comcast have argued over which bid would face an easier path to regulatory approval, an important consideration for Fox stockholders, who must consider which deal to accept. A July 10 Fox shareholder vote on the Disney deal was postponed to allow more time to evaluate Disney’s new offer.

When Comcast made its bid for Fox, Comcast CEO Brian Roberts said in a letter to Murdoch and his sons that he is “highly confident” that Comcast will “obtain all necessary regulatory approvals in a timely manner and that our transaction is as or more likely to receive regulatory approval than the Disney transaction.”

Comcast originally planned to use its shares to buy the Fox assets, but shareholders got skittish and Comcast’s stock price has dropped nearly 20 percent this year. Because of that volatility, Comcast changed its approach and offered cash — which offered the Murdoch family less upside long-term.

Using cash also made Comcast’s deal highly leveraged: The company was going to have to shoulder at least $66 billion in debt to finance the purchase.