By Keach Hagey and Erich Schwartzel
Walt Disney Co. raised its offer to purchase most of 21st
Century Fox to more than $71.3 billion in cash and stock, topping
an unsolicited 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 the regulatory advantage over Comcast in winning a company
to help it fight back against new-media competitors like Netflix
Inc.
Fox, in a news release, said the new Disney deal "is superior to
the proposal" made by Comcast earlier this month. A Comcast
spokeswoman had no immediate comment.
Disney and Comcast are battling for prized media assets
including the Twentieth Century Fox film and TV studio; U.S. cable
networks FX and regional sports channels; international assets such
as Sky PLC and Star India; and Fox's one-third stake in the
streaming service Hulu.
Fox and Disney were negotiating terms of an amended agreement
over the weekend and had the outlines of a deal by Tuesday, though
they were nailing down details like the mix of cash and stock, a
person close to the situation said.
Disney submitted its bid Wednesday ahead of a Fox board meeting
in London, another person familiar with the situation said. Fox
Executive Chairman Rupert Murdoch and Disney Chief Executive Bob
Iger met to discuss the new pact.
Disney agreed to pay Fox shareholders roughly 50% in cash and
50% in stock. If the current deal closes, Fox shareholders would
own 19% of the combined company, compared with 25% under the old
deal.
Some observers have said it might make sense for Disney and
Comcast to divide the Fox assets among them, but Mr. Iger said that
idea is a nonstarter. "We have an agreement in place with [Fox]
that precludes that," he said on a conference call Wednesday.
Disney also has time on its side, Mr. Iger said, because the
company's deal with Fox has undergone several months of regulatory
review. "We believe that we have a much better opportunity, both in
terms of approval and the timing of that approval, than Comcast
does," he said.
The CEO also highlighted how Fox's programming would boost his
company's efforts to launch a Disney-branded streaming service next
year and directly compete with Netflix. "Direct-to-consumer
distribution has become an even more compelling proposition in the
six months since we announced the deal. The consumer is voting --
loudly," he said.
The fight for Fox is part of a scramble by media, telecom and
cable companies to get bigger as the superpowers of the technology
industry have disrupted old ways of doing business.
Neither proposed deal includes Fox News, Fox Sports 1, the Fox
broadcast network or its television stations. In either scenario,
those assets would be spun off into a new company, for the moment
dubbed "New Fox."
On a per-share basis, the new Disney deal values the Fox assets
being acquired at $38 a share, compared with Comcast's offer of $35
and Disney's original offer of $29.54, based on the last trading
day before it was announced.
On Wednesday, Fox's class A shares rose 7.5% to $48.08, and
Comcast shares added 1.8% to $33.39.
Disney shareholders didn't appear to mind stomaching the higher
price as the stock rose 1% to $107.15, but some analysts said the
move was foolish. "We didn't like the deal at the prior price, and
we like it substantially less now," said Doug Creutz of Cowen &
Co. The analyst said a Disney-Fox tie-up isn't the way to win the
direct-to-consumer fight.
A continuing bidding war between Disney and Comcast could be a
strain on both companies' balance sheets. Disney Chief Financial
Officer Christine McCarthy said the company no longer expects to
complete a $20 billion share repurchase announced with the initial
deal in December.
Fox's board and shareholders have had to weigh a number of
factors as they measure the offers, including their structure. More
stock in the deal has tax advantages for shareholders.
These tax advantages might be particularly large for Fox
shareholders, such as the Murdoch family, who have held Fox's stock
for a long time and thus face a potentially large capital gain to
pay taxes on if it is sold for cash. Rupert Murdoch and his family
have a 17% economic interest in 21st Century Fox. 21st Century Fox
and Wall Street Journal-parent News Corp share common
ownership.
Disney said the stock part of the deal is expected to be
tax-free to 21st Century Fox shareholders. Other shareholders,
particularly the large institutional shareholders that are Fox's
biggest investors, may care less about taxes.
People close to Fox have said that the Murdochs are looking for
the best financial deal and are working in the best interests of
all shareholders.
As a result of the new Disney offer, Fox postponed the special
meeting of shareholders it had originally scheduled on July 10 to
"a future date."
Disney's offer puts a "collar" on the stock portion, saying Fox
shareholders would receive Disney shares equal to the $38 price so
long as Disney's stock price is between $93.53 and $114.32.
Regulatory hurdles have been a consideration. The Justice
Department would have to sign off on either deal, and Fox cited
regulatory concerns among its reasons for rebuffing Comcast's
initial approach.
However, last week, a judge struck down the Justice Department's
attempt to block AT&T's acquisition of Time Warner Inc. Comcast
believes the court's approval of a "vertical" merger between a
distributor and a content company should nullify Fox's regulatory
concerns, since a Comcast-Fox tie-up would have similar
characteristics, people close to the cable giant say.
Mr. Iger said Wednesday that he still believed a "vertical"
merger of the kind Comcast proposed for the Fox assets faced
regulatory headwinds.
--Austen Hufford and Dana Mattioli contributed to this
article.
Write to Keach Hagey at keach.hagey@wsj.com and Erich Schwartzel
at erich.schwartzel@wsj.com
(END) Dow Jones Newswires
June 20, 2018 16:58 ET (20:58 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
Comcast (NASDAQ:CMCSA)
Historical Stock Chart
From Apr 2024 to May 2024
Comcast (NASDAQ:CMCSA)
Historical Stock Chart
From May 2023 to May 2024