The move sets in motion what could be one of the all-time merger battles in media. Comcast chief Brian Roberts is set to clash with Disney’s Bob Iger for control of the film and TV empire that Rupert Murdoch and sons James and Lachlan spent years building. While Disney and Fox have agreed to a $52.4 billion deal, Comcast’s counter is believed to be in the $60 billion range.
As many in the media business and on Wall Street had been predicting since word surfaced two weeks ago of Comcast meeting with bankers to line up financing, the NBCUniversal owner and No. 1 U.S. cable distributor said a rival bid is in the “advanced stages.” The trigger for this morning’s announcement, Comcast said, was the filing of SEC documents by Fox and Disney in preparation for special shareholder meetings. The summer meetings are when 21st Century Fox and Disney shareholders are expected to vote on the proposed $52.4 billion acquisition of the Fox assets — neither company has specified a date as yet for its vote.
Wall Street investors had a clear but somewhat muted reaction to the news. Fox shares gained 1.6% to $37.88 on moderately increased trading volume. Comcast shares dipped a bit less than 2% to close at $31.88 and Disney’s slid 1% to 102.89. Shares in all three companies stayed locked in those ranges for most of the day, which saw small gains for Wall Street’s major stock indices.
Comcast has not specified a price for its bid. The assets on the table include everything under the Murdoch tent except for the Fox broadcast network, Fox News and the company’s portfolio of local TV stations. In play are the Fox film and TV studios and a lucrative set of cable networks, including FX, National Geographic and regional sports operations.
The only reason Comcast is signaling an offer but not actually making one is that it is waiting on the all-determining decision expected June 12 in the AT&T-Time Warner antitrust case. If U.S. District Court Judge Richard J. Leon rejects regulators’ argument that the deal is anti-competitive, a free-for-all will ensue for not only Fox but for other major chunks of media real estate. Traditional players jolted by the disruptive entry this decade of tech behemoths into their backyards have been scrambling to fortify themselves, leading to a spree of M&A deals both real and imagined.
In its statement, Comcast said it “confirms that it is considering, and is in advanced stages of preparing, an offer for the businesses that Fox has agreed to sell to Disney.” While the company said that “no final decision has been made,” it said that “any offer for Fox would be all-cash and at a premium to the value of the current all-share offer from Disney.” Comcast said, “the work to finance the all-cash offer and make the key regulatory filings is well advanced.”
The statement added, “The structure and terms of any offer by Comcast, including with respect to both the spin-off of “New Fox” and the regulatory risk provisions and the related termination fee, would be at least as favorable to Fox shareholders as the Disney offer.”
Comcast had entered the bidding for Fox’s studio assets last fall before Disney set its plan with Fox in December. While the company has sound fundamentals, many financial analysts have questioned its strategy of going all-in for Fox given the amount of debt it would have to take on. The company has also recently thrown its hat in the ring for European pay-TV giant Sky, offering $31 billion.
With $6 billion in cash on its balance sheet, Comcast is in a well-fortified position to enter the merger arena. But last week, Moody’s Investor Service cautioned that if both the Sky and Fox deals were to go through, Comcast’s total debt would reach $164 billion and could “imperil” the company’s credit rating.
There are also significant expenses related to capital-gains taxes in the case of all-cash offers, compared with stock transactions — one reason why Rupert Murdoch, who owns 17% of Fox has leaned away from cash deals. Offering stock isn’t an option for Comcast, though, as its shares have dropped 16% in 2018 to date.
For Roberts, the quest for Fox has a personal dimension. More than a decade ago, as the newly installed CEO and the son of Comcast founder Ralph Roberts, he spearheaded an unsolicited $52 billion offer for Disney in 2004, well before NBCUniversal had entered the fold. Disney rejected the overture.