By Peter Gleason
So Comcast is offering $65 billion for the bulk of 21stCentury Fox’s TV and studio assets, topping a previous $52.4 billion bid for the properties by Walt Disney Company and likely setting off a bidding war between two media giants.
The Philly broadcast behemoth is trying to beat Mickey Mouse and Disney in 2018 when it couldn’t snag Disney with a hostile bid in 2004.
This time Brian Roberts’ real motivation is the golbal reach that Fox assets — including its valuable reach sports networks, though not Fox Sports and FS1 — would mean for his Philly-basewd footprint.
The maneuver would marry 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. Comcast said its offer was valued at $35.00 per share in cash, representing a premium of approximately 19% to the value of Disney’s all-stock offer.
“We have long admired what the Murdoch family has built at Twenty-First Century Fox,” Comcast CEO Roberts wrote in a letter to Fox’s controlling Murdoch family, 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.
To move the bid from disruption to a fait accompli, Comcast, will first have to outmaneuver Disney. The Burbank. California, entertainment titan 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.
Under the terms of Disney’s proposed deal for Fox, the Murdoch family-controlled company would be on the hook to pay a breakup fee of $1.52 billion if Fox pulls out of the pact for any reason not related to a regulatory block of the transaction. – a fee Comcast said it would reimburse if Fox took it up on its offer. Fox has said its board of directors recommends stockholders vote in favor of the proposal to sell to Disney
Comcast’s bid sets up a showdown for a once-in-a-generation opportunity that could cement Disney CEO BobIger’s legacy. Sealing a deal for Fox would cap off a spate of massive acquisitions under his aegis at Disney, which include a $4 billion buy of Marvel Entertainment in 2009; a $4 billion purchase of Lucasfilm in 2009; and $2.58 billion over three years for BAMTech, the streaming-video unit that is meant to power Disney’s various subscription-based video outlets.
But a deal would bolster Comcast in similar fashion, adding new heft to its Universal movie production operations, its NBC Sports unit, and its cable programming operations, among other properties. And a win would lend Comcast new momentum in its quest to grow after AT&T was granted permission Tuesday to complete its $85.4 billion purchase of Time Warner.
The race for Fox spotlights the growing pressure placed on traditional media companies, who have long depended on their ability to assemble mass audiences to watch content distributed in linear fashion. The rise of streaming video and mobile devices, however, has made one-to-one broadcasting easy to put into place. Consumers can now watch their favorite movies and TV series on demand. And a new cohort of tech-savvy content providers has thrived even as traditional media companies have grappled with reworking their operations to accommodate viewers who can binge-watch a video favorite at a time and date of their own choosing. Disney, Comcast and others now vie with new giants like Netflix and Amazon, as well as other digital hulks eager to get into video, like Facebook, Twitter and Apple.
Comcast might face a higher degree of scrutiny. Disney does not own a cable-distribution operation, while Comcast runs one of the nation’s largest. But because Comcast snapped up the large NBCUniversal conglomerate in 2011, regulators have placed its subsequent efforts to grow under a powerful microscope. In 2015, when Comcast tried to expand its influence with a purchase of Time Warner Cable, the Department of Justice balked, and the Philly cable giant backed down.
Comcast’s Roberts addressed that very matter 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.
Both companies are also interested in nabbing Fox’s 39% stake in British satellite broadcaster Sky PLC. The European media outlet would give Comcast or Disney needed reach into foreign markets, and could also potentially fuel new business for NBC News or ABC News. Fox is in the midst of a years-long process to acquire the 61% of Sky it does not own for about $16 billion, and has tried to move past skeptical British regulators. Comcast in April injected some chaos into that process by offering $30.7 billion for the whole company. Comcast said it intended to pursue its bid for Sky ” in parallel”with its quest for the Fox assets.