Philadelphia, Pennsylvania, USA: Comcast (CMCSA.O), the largest U.S. cable-TV provider, made an all-cash offer of $65 billion, on Wednesday, to acquire much of Twenty-First Century Fox Inc (FOXA.O) media assets – topping a previous proposal by Walt Disney Co. and kicking off a potential bidding war.
Comcast said its cash offer reflects a $65 billion value for Fox’s entertainment assets. At $35 a share, the bid represents a 19 percent premium over the Disney offer, the company said.
The all-cash bid by Comcast came a day after a federal judge approved a merger between AT&T and Time Warner. Comcast executives awaited the decision in that case before mounting their bid for 21st Century Fox. It is hard to overstate how closely Comcast was monitoring the situation. Executives at NBCUniversal had dispatched people to wait in the courtroom to hear the verdict. Mr. Roberts waited at his executive offices at Comcast’s headquarters in Philadelphia.
According to a person familiar with the matter, Comcast’s board met Tuesday evening to discuss its revamped bid for Fox, which rebuffed an overture last year.
In December, Disney struck a $52.4 billion, all-stock deal for Fox’s assets. Comcast, whose roughly $60 billion offer for the Fox assets was rebuffed last year, is now including contractual assurances such as a reverse breakup fee — worth about $2.5 billion — in the event a transaction is blocked by the government.
If Comcast succeeds, the move will bring together, Comcast’s NBC broadcast network and the Universal movie studio with the FX cable network, 20th Century Fox, a lucrative group of regional sports networks and a stake in British satellite broadcaster Sky.
Mr. Murdoch and his company’s board had rejected Comcast’s earlier offer partly on concerns the government would block the deal. But the AT&T-Time Warner decision also allayed many concerns that a Comcast takeover of 21st Century Fox’s businesses would be blocked by regulators.
Comcast Chairman and CEO Brian Roberts cited the AT&T/Time Warner court decision in his offer letter to 21st Century Fox Executive Chairman Rupert Murdoch and his sons, co-Executive Chairman Lachlan Murdoch and CEO James Murdoch.
“In light of yesterday’s decision in the AT&T/Time Warner case, the limited time prior to your shareholders’ meeting, and our strong continued interest, we are pleased to present a new, all-cash proposal that fully addresses the Board’s stated concerns with our prior proposal,” Roberts wrote.
“We have long admired what the Murdoch family has built at Twenty-First Century Fox,” Roberts added telling 21st Century Fox Executive Chairman Rupert Murdoch and his sons Lachlan and James that Comcast “would be the right strategic home” for the parts of the company that are for sale.
Comcast’s Roberts also addressed the possibility of Justice Department scrutiny in his letter, telling the Murdochs the company was “highly confident that our proposed transaction 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 said it would agree to pay a $2.5 billion reverse termination fee, the same amount agreed to by Disney. In all, Comcast would pay $4.025 billion – the reverse termination fee and the reimbursement to Disney -if it failed to close the transaction.
Entertainment titan, Disney, has a chance to match or even top Comcast’s offer.
Fox had already planned to convene a July 10 investor meeting to address the sale of its properties, but could postpone the event if its executives believe shareholders need to review additional materials.
Fox intends to keep Fox Broadcasting, Fox Sports and Fox News under its own corporate umbrella. The businesses that Mr. Murdoch has agreed to sell include the 20th Century Fox film and TV studios, almost two dozen regional sports networks like the Yankees’ YES channel, a lineup of cable networks that includes FX and a 30 percent ownership stake in the streaming service Hulu.
Mr. Murdoch sees Disney’s stock as ultimately more valuable than Comcast’s, according to two people familiar with his thinking who spoke on condition of anonymity because the deal was still in process. Since Disney’s bid is in stock, Mr. Murdoch is banking on a rise in the company’s value over time. Comcast’s all-cash offer would also mean an immediate tax hit.
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.
Mergers will also allow companies to compete for costlier rights to professional sports, seen as perhaps the only way to keep viewers from cutting the cable cord, and to build out their streaming services.
Comcast also 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.
Shares of Comcast, Fox and Disney were barely changed in after-hours trade.