The offer is nearly $19 billion richer than the one Fox accepted last December, and it’s close to 10% ahead of the $65 billion one Comcast submitted last week. Most analysts and industry observers had expected Disney to match Comcast, but not go so much higher. The aggressive counter is a sign of the intensity of the M&A climate. AT&T finally closed its purchase of Time Warner late last week and other traditional media companies are urgently seeking dance partners as they battle deep-pocketed digital rivals.
Disney is offering $38 per share in cash and stock, and taking on $13.8B of Fox’s net debt, which would increase the total transaction to $85.1B. It announced the counter on the same day that Fox’s board was scheduled to have a regularly scheduled meeting. Fox also had slated a special meeting on July 10, during which it would evaluate the Disney offer, but that meeting has been postponed.
During the first hour of trading on Wall Street, Fox’s stock has jumped more than 6% on the news, to $47.50 a share. Disney’s climbed nearly 1% to $107, and Comcast shares have risen 1% to $33.17.
“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 Disney CEO Bob Iger. “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.”
Under the revised deal, the terms would remain essentially the same, Fox said in a statement, though it noted that Disney’s offer would allow Fox stockholders to receive cash or stock on a 50-50 prorated basis. The collar on the stock consideration will ensure that Fox shareholders will get a number of Disney shares equal to $38 in value if the average Disney stock price at closing is between $93.53 and $114.32.
“We are extremely proud of the businesses we have built at 21st Century Fox, and firmly believe that this combination with Disney will unlock even more value for shareholders as the new Disney continues to set the pace at a dynamic time for our industry,” said Rupert Murdoch, Fox’s Executive Chairman. “We remain convinced that the combination of 21CF’s iconic assets, brands and franchises with Disney’s will create one of the greatest, most innovative companies in the world.”
In light of the new Disney bid, Fox has not concluded that the June 13 offer from Comcast would count as a “superior proposal,” as specified by the existing merger agreement with Disney. At the same time, the amended offer still allows the Fox board to evaluate a competing proposal.
Following a federal judge’s decision on June 12 to allow AT&T’s $85.4 billion merger with Time Warner to go through, Comcast officially bid on 21st Century Fox. The assets in play include the storied film and TV studio, home to film franchises including Avatar, Deadpool and X-Men, and TV juggernauts like Modern Family. FX, NatGeo, 30% of Hulu, Star India and 39% of Sky.
Disney’s assertive and swift response to Comcast’s interest will certainly draw scrutiny in some quarters. While Disney’s performance of late and its standing in Hollywood has been strong, there is a school of thought among some Wall Street analysts that the company could be overpaying for traditional assets it may not truly need. Bulls would counter by pointing to several recent Disney acquisitions such as BamTech, Marvel or Lucasfilm, which have helped fortify its position and seem like bargains in hindsight.