UPDATED with Disney comment, stock prices. After months of dueling with Disney for ownership of the majority of 21st Century Fox, Comcast has pulled out of the battle, ceding the prize and ending one of the highest-stakes duels in media history.
“Comcast does not intend to pursue further the acquisition of the Twenty-First Century Fox assets and, instead, will focus on our recommended offer for Sky,” the company said in a statement.
CEO Brian Roberts, who had sought to outdo Disney given Comcast’s history with the company, which dates to an unsolicited takeover bid rebuffed by Disney in 2004, delivered a sporting statement. “I’d like to congratulate Bob Iger and the team at Disney and commend the Murdoch family and Fox for creating such a desirable and respected company,” he said.
In a company statement, Iger responded, “Our incredible enthusiasm for this acquisition and the value it will create has continued to grow as we’ve come to know 21st Century Fox’s stellar array of talent and assets. We’re extremely pleased with today’s news, and our focus now is on completing the regulatory process and ultimately moving toward integrating our businesses.”
Comcast investors reacted favorably to the withdrawal, boosting the company’s stock 3% in morning trading, to $35.12. Disney shares also jumped, gaining 2% to $113.24. Fox, which has gained nearly 30% since early June on the bidding war, slumped nearly 2% to $45.86.
Comcast recently raised its bid for the controlling 61% stake in European pay-TV giant Sky to $34 billion. Fox, which already owns 39% of Sky, had previously offered $32.5 billion.
The concession gives Disney, subject to shareholder and regulatory approval, Fox’s film and TV studio, major properties including X-Men, Avatar and Deadpool a suite of cable networks including FX and National Geographic and a 30% stake in Hulu. Already one of Hulu’s owners, Disney will now control 60% of the burgeoning streaming service, offering it some intriguing new options.
Disney is paying $71.3 billion in cash and stock, a significant uptick from the $52.4 billion that the Murdoch family had accepted last December. Because they will become major shareholders in whoever prevailed, the Murdochs signaled a preference for Disney over Comcast in large part because of a belief in the long-term story of its stock and Iger’s track record. They will now focus on “New Fox,” the remaining assets including the Fox broadcast network, Fox News Channel and a revenue-generating collection of local TV stations.
For employees at all three conglomerates involved in the bidding war, the news clarifies things to a large degree and may offer some momentary summertime relief, though the road ahead is a winding one. Shareholders of Fox and Disney will vote on the deal on July 27. With the DOJ already signed off, the biggest regulatory hurdle has been cleared. The work of combining the two companies will soon become the focus, with sizable layoffs looming and more than a few integration challenges ahead. How will edgier Fox brands like Deadpool or FX Networks conform to Disney’s PG-13 approach?
Comcast, seeing the landscape consolidate around it, moved aggressively to bid up the Fox assets, raising its offer in the immediate aftermath of a federal judge’s ruling clearing the way for AT&T and Time Warner to get together. The government last week appealed the decision, throwing things into a more confused state. The appeal, combined with a settlement between Disney and the Department of Justice that sealed DOJ approval of the merger, gave Disney an advantage that many had predicted would box out Comcast.
Wall Street analysts had been predicting Comcast would ditch Fox and pursue majority control of Sky, the European pay-TV giant that is 39%-owned by Fox. One issue for the company had it stayed in both contests would have been leverage — its stock already has been hampered as investors eye debt levels at four to five times earnings. For a conservatively managed company like Comcast, such levels are rare air indeed. AT&T, in swallowing Time Warner, immediately became one of the most indebted companies in America.
One question still pending is who will emerge as a buyer for the regional sports networks owned by Fox, a $20 billion-plus portfolio whose sale is required by the DOJ.
Regardless of who scoops up the RSNs, the resolution brings clarity to Disney’s strategy, which is to use the Fox assets to fill its content pipeline, particularly as it prepares to roll out its direct-to-consumer streaming service in 2019.