Fox Accepts Disney’s New $71.3B Offer

by Ike Obudulu Posted on June 21st, 2018

Fox has agreed to the new $71.3 billion in cash and stock proposal from Walt Disney Co., calling it “superior” to Comcast’s offer, though that doesn’t stop other companies from making a bid. The deal still needs to be voted on by shareholders.

Walt Disney Co. raised its offer to purchase most of 21st Century Fox to more than $71.3 billion in cash and stock on wednesday, topping an offer from rival Comcast Corp. and escalating the bidding war for the coveted media properties.

Disney’s new offer is far higher than its original deal, $52.4 billion in stock, and surpasses Comcast’s all-cash offer of roughly $65 billion. In addition to having the higher offer, Disney said it also has a regulatory advantage over Comcast in winning a company to help it fight back against…

Disney’s new offer comes down to $38 per share in cash and stock, in addition to the company taking on Fox’s net debt, which increases the total transaction to $85.1 billion.

This bidding war comes after Disney and Fox already agreed on a purchase earlier this year, with the hefty price tag sitting at $52.4 billion. Comcast swooped at the eleventh hour with a bigger deal, but the original terms of the purchase gave Disney a chance to come in with another offer.

While the back-and-forth may not have been what Disney expected, the company certainly sounds confident that it will weather the storm.

“The acquisition of 21st Century Fox will bring significant financial value to the shareholders of both companies, and after six months of integration planning we’re even more enthusiastic and confident in the strategic fit of the assets and the talent at Fox,” said Robert A. Iger, Chairman and Chief Executive Officer, The Walt Disney Company. “At a time of dynamic change in the entertainment industry, the combination of Disney’s and Fox’s unparalleled collection of businesses and franchises will allow us to create more appealing high-quality content, expand our direct-to-consumer offerings and international presence, and deliver more personalized and compelling entertainment experiences to meet growing consumer demand around the world.”

Disney’s new offer couldn’t come at a better time, as the Fox board had already scheduled a meeting for later today, to discuss the legitimacy of Comcast’s offer. Now, it seems as though that option is null and void.

It’s unclear at this point whether or not Comcast will increase its bid again, or yield to the high offer from Disney. There’s also a potential option in which the companies could split the Fox assets.

Fox has reportedly accepted Disney’s proposal, making it the offer to beat in the bidding war.

The new cash-or-stock deal may be attractive to Fox’s largest shareholder, Rupert Murdoch, who owns 17 percent voting shares along with his family. The Murdochs face a large capital gains tax bill under Comcast’s all-cash offer. Disney’s previous offer was all stock.

Fox’s board of directors said Disney’s latest offer was “superior” to the proposal made by Comcast and would create “one of the greatest, most innovative companies in the world.”

Disney and Comcast want to bulk up their own entertainment businesses with Fox’s well-known TV shows and movie franchises, like the “X-Men” superheroes and “The Simpsons,” to better compete with fast-growing digital rivals Netflix Inc and Amazon.com Inc.

Fox’s international media companies Star India and European pay TV company Sky TV Plc appeal to Disney and Comcast for overseas growth.

The latest move by Disney raises the hurdle for Comcast, which has to decide whether it is feasible to counter with a higher bid.

Fox shares jumped 8 percent to $48.23, while Comcast rose 2.1 percent to $33.52. Disney added 1.2 percent to $107.43.

Sky Plc shares gained 3.1 pct as investors hoped Fox would increase its offer since the company could afford to pay more due to the bidding war. The European pay-TV group, 39 pct owned by Fox, is also being pursued by Comcast.

Major sports and news assets including Fox News, Fox Business Network and Fox Sports are not part of the businesses being sold and would be spun off into a separate company.

Following the deal, Fox shareholders would own about 19 percent of the combined company, Disney Chief Financial Officer Christine McCarthy said on a conference call.

Disney no longer expects to complete the $20 billion share repurchase announced in December, McCarthy said.

Fox said it will postpone a special shareholders meeting in order to provide stockholders with an opportunity to evaluate Disney’s amended offer.

EARLIER: ‎$65B Cash: Comcast Raises Stakes In Bidding War With Disney For Fox – 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.

Author

Ike Obudulu

Ike Obudulu

Versatile Certified Fraud Examiner, Chartered Accountant, Certified Internal Auditor with an MBA in Finance And Investments who has both worked for and consulted with some of the world's largest companies on main street and wall street in over 20 countries, Ike brings his extensive reporting and investigations experience to bear on his role as Chief Editor.
Phone
Email

Leave a Reply