Comcast offers US$65b for Fox in showdown with Disney

A sign is shown at the entrance to Fox Studios in Los Angeles June 13, 2018. — Reuters pic
A sign is shown at the entrance to Fox Studios in Los Angeles June 13, 2018. — Reuters pic

NEW YORK, June 14 — Comcast Corp made a long-awaited offer to acquire much of 21st Century Fox Inc, topping a previous proposal by Walt Disney Co and setting up a bidding war for Rupert Murdoch’s media empire.

Comcast, the largest US cable-TV provider, said its offer reflects a US$65 billion (RM259.3 billion) value for Fox’s entertainment assets. At US$35 a share, the bid represents a 19 per cent premium over the Disney offer, the company said yesterday. And it’s cash, rather the the stock Disney is proposing.

The move follows AT&T Inc’s victory over the US Justice Department in its antitrust battle to take over Time Warner Inc. That outcome is expected to spur a wave of media consolidation, emboldening companies to make offers they might otherwise have skipped.

Disney and Comcast are locked in a high-stakes contest for the Fox entertainment assets, which include movie and TV studios, television networks such as FX, and multichannel providers like Star India and Sky Plc. With yesterday’s bid, Comcast Chief Executive Officer Brian Roberts is seeking to disrupt Disney CEO Bob Iger’s plan to use Fox properties to bolster that company’s already-vast entertainment offerings.

Comcast first approached Fox last year with an informal proposal. Comcast bid 16 per cent more than Disney for Fox’s media properties, but that offer was deemed too risky. The AT&T decision has lifted some of those clouds.

Breakup fee

Murdoch, 87, also wasn’t swayed by Comcast’s overtures because the cable company didn’t offer a breakup fee. Comcast said last month that its new offer would be at least as favourable to Fox shareholders as Disney’s terms. Indeed, the proposal unveiled yesterday include a US$2.5 billion termination fee — similar to what Disney has offered.

“We are pleased to present a new, all-cash proposal that fully addresses the board’s stated concerns with our prior proposal,” Roberts, 58, said in a letter to Rupert Murdoch and his sons, Lachlan and James, who also serve as Fox executives.

“We are also 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.”

Netflix threat

Disney made a US$52.4 billion all-stock bid for Fox, which was accepted in December. Comcast’s official counterproposal now pressures Disney to come up with a higher offer for Fox — lest it have compelling entertainment assets slip through its hands at a time when technology giants are storming Hollywood, forcing traditional media companies to bulk up.

In recent weeks, Philadelphia-based Comcast confirmed its desire to outbid Disney in advance of shareholder votes set for July 10. The cable provider planned to approach Fox investors and has told the Justice Department of its interest, an early step in addressing potential antitrust concerns, according to a person familiar with the matter.

Comcast already owns film and TV studios, broadcast and cable TV operations including the NBC and USA networks, and the Universal Studios theme parks.

Streaming ambitions

Both Disney and Comcast could use Fox’s TV and movie properties to stream more content directly to consumers and compete with Netflix Inc. The companies also are interested in expanding internationally at a time when the US television business is slowing.

When a federal judge rejected the Justice Department’s suit against the Time Warner deal, it was seen as an endorsement of so-called vertical mergers — combinations that include both media distribution and the programming itself.

Comcast also is making an ambitious push in Europe that centres on UK pay TV provider Sky. After Fox made a takeover offer for the 61 per cent stake in Sky that it doesn’t already own, Comcast launched a £22 billion (RM117.4 billion) counterbid for the business. Disney also is interested in owning Sky.

But Comcast investors haven’t welcomed the company’s sudden appetite for megadeals. Its shares were down 19 per cent this year through Wednesday. If Comcast buys Fox and Sky, the cable giant could become one of America’s largest corporate borrowers and its credit ratings may teeter at the bottom edge of investment grade.

Comcast’s board has already unanimously approved the Fox proposal, and no investor vote will be needed. To further sweeten the deal, Comcast plans to reimburse the US$1.5 billion fee that it would have to pay Disney to break up that deal.

Roberts, the CEO, said he expects the Justice Department to review his proposed takeover plan at the same speed as Disney’s deal. And because Comcast has less of a presence outside the US, the company expects it can get international clearance easily.

“There should not be any meaningful difference in the timing of the US antitrust review between a Comcast and Disney transaction,” he said. “We expect to work together to reach an agreement over the next several days.” — Bloomberg

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