The Atlanta Journal-Constitution
What will happen when Fox is sold?
Disney is upping the ante for Fox, making a $70.3 billion counterbid for its various entertainment businesses.
NEW YORK — The mouse is chasing the fox.
Disney is upping the ante for Fox, making a $70.3 billion counterbid for Fox’s entertainment businesses following Comcast’s $65 billion offer for the company.
The battle for Twenty-First Century Fox reflects a new imperative among entertainment and telecommunications firms. They are amassing ever more programming to better compete with technology companies such as Amazon and Netflix for viewers’ attention — and dollars. The bidding war comes after AT&T bought Time Warner for $81 billion, after a federal judge rejected the government’s anti-trust concerns.
What’s at stake?
At stake are cable channels including FX and National Geographic, the “Avatar” and “X-Men” film franchises, and a pair of international television networks. Fox and its chairman, Rupert Murdoch, will have a lot of say about how the process is managed. Critics say that fewer companies will mean fewer choices and higher prices for consumers.
How did we get here?
Disney’s move had been expected ever since Comcast’s bid, which was higher than Disney’s original offer in December of $52.5 billion in stock. Comcast’s offer was all cash. Disney’s new offer of $38 per share is half cash and half stock.
“We’re even more enthusiastic and confident in the strategic fit of the assets and the talent at Fox,” said Disney CEO Bob Iger. Comcast, based in Philadelphia, did not immediately respond to a request for comment.
Bigger isn’t always better
It’s not as simple as saying one offer is larger than another.
First, Fox has to decide if Comcast’s financing is good, just as someone selling a home wants to make sure the buyer has secured a mortgage. Also, the currency of both offers is different. Comcast is offering cash, while Disney is paying with its stock and cash, which could carry some tax benefits and rise in value in the long run.
Fox also wants to be confident that any bid would be approved by the government.
The Federal Communications Commission, which regulates broadcasters, isn’t a factor. Disney’s proposal isn’t undergoing FCC review, and Comcast said its offer shouldn’t be subject to FCC approval since there wouldn’t be any transfer of broadcast licenses. The Fox broadcast network, Fox News and the sports network FS1 aren’t being sold.
How high will bidding go?
GBH Insights analyst Dan Ives said he thinks the “line in the sand” is $75 billion to $80 billion.
Why the bidding war?
Fox’s healthy foreign assets are a key reason both Comcast and Disney are pursuing a deal as media companies across the country have been wrestling with a decay in its cornerstone business: cable and satellite customers.
Sports networks on the table
Fox owns 22 regional sports networks, such as the Yankees’ YES channel in the New York area. Comcast’s NBCUniversal group operates nine regional sports networks, while Disney has control of ESPN, the dominant cable sports channel in the country. The Justice Department could see either of these combinations as potentially stifling competition.
Murdoch and his board will want to see which side has crafted the better regulatory maneuver. Both Disney and Comcast are willing to divest the regional sports networks should the government require.
Separately, Hulu would come under the control of either Comcast or Fox — both of which own portions of the streaming service. The Justice Department could see Comcast as a possible threat here since it is also the largest broadband provider in the country. Disney is just a programmer.
Who will win?
Murdoch said the company “firmly believes” that the combination with Disney is a good fit.
But the New York company also said it is still weighing both offers, and noted that Disney’s new bid doesn’t have any provisions in it that prevents Fox from considering other offers.
Fox and Disney shareholders had been scheduled to vote on Disney’s original bid July 10, but that meeting has been postponed. Regardless of whether Disney or Comcast winds up with the assets, Murdoch will be the real winner.