As media and tech prime movers gather in Sun Valley, Idaho, for this week’s annual Allen & Co. retreat, one of the biggest deals in an already surging M&A marketplace may well hit a whole new level during the conference.
Comcast has been planning for three weeks now to respond to Disney’s aggressive $71.3 billion bid for most of 21st Century Fox. It hasn’t returned to the bargaining table for a few reasons, one of which is the sizable amount of debt the deal will require, which is already dragging down its stock. Also, the clock is ticking, with Fox and Disney shareholders set to vote on the deal July 27.
Multiple sources indicate that talks have continued between Comcast and outside companies — everyone from private equity firms to fellow media concerns to tech giants. These players could become strategic partners, taking on certain key assets and helping lighten the financial burden and also lower regulatory hurdles to a deal. The list of invitees at Sun Valley includes the very moguls who have been jockeying for screen supremacy, including Comcast’s Brian Roberts, Disney’s Bob Iger and the Murdoch family. From the tech world, Amazon’s Jeff Bezos, Apple CEO Tim Cook, Netflix chief Reed Hastings and Facebook founder Mark Zuckerberg could all make the scene.
For years, Hollywood has watched as tech companies have lured away audiences with increasing success and vast war chests. (In a town hall meeting with his new HBO colleagues last month, WarnerMedia chief John Stankey pointed to competition from digital rivals as the main reason the network needs to step up its game.) Many industry veterans and pundits have long insisted the day is coming soon when new media swallows old media, which is the basis of one Comcast-Disney-Fox theory making the rounds at the highest levels. According to these accounts, Comcast has held active talks with tech companies about taking the domestic assets (such as the film and TV studio) while Comcast would grab only the international ones, such as Fox’s array of global cable channels.
While the deep pockets, velocity and scale of Google/YouTube, Facebook, Amazon and Apple have sent shivers up Hollywood’s collective spine, the extent of their appetite remains unclear. Scooping up a trove of traditional assets could power a new streaming service or device launch and give the company even more clout than they currently enjoy, of course. In that context, Apple is often mentioned as a wild card — while it has been industrious on the production front, signing elite talent like Oprah Winfrey, it has also made noises about a more comprehensive play in the media ecosystem.
Yet skeptics note that with business humming along, tech companies may not be inclined to saddle themselves with traditional assets like a physical film and TV studio (something Netflix has never bothered to create). Apple’s biggest transaction to date was acquiring Beats for $3 billion — a meaningful get but far from a media mega-deal. And at many junctures in their history as frenemies, media and tech companies have found themselves on opposite sides of major issues, such as the SOPA anti-piracy efforts several years ago, and more recent fights over net neutrality rollbacks and social media advertising.
Disney’s settlement last month with the U.S. Department of Justice checked a key box in Washington for its Fox offer. It also raised the bar for Comcast, which will need to not only raise its offer well above $71.3 billion but also show that it has taken steps to create a regulatory glide path. Because the DOJ insisted that Disney divest of Fox’s 22 regional sports networks, Comcast has held talks with companies that could be buyers of the RSNs, which would hasten the process, Reuters has reported.
Whether Comcast persists as the sole buyer or invites a partner to share the cost and try to streamline the review process, timing is crucial. A counter is likely in the next two weeks, ahead of the shareholder votes that could make the odds far longer, and some insiders speculate that a strong comeback could play well at Sun Valley.
The conference’s profile has arguably dimmed in recent years as Allen & Co.’s role in media deals has ebbed, but it remains a prominent backdrop for media chattering about dealmaking, a place to spot unexpected pairings in the wild. Much of the real action occurs behind closed doors or well out of view of roaming reporters or CNBC’s set.
This year’s conversations could prove awkward for some attendees. For example, National Amusements chief Shari Redstone is slated to be in Idaho, as will CBS boss Les Moonves. The two companies are locked in a court battle over the shareholder control structure that enables Redstone to hold the cards with CBS and also Viacom.
Spots for private jets will be at a premium. Quoting a local airport manager, the Idaho Mountain Express predicted that space will fill up in six to seven hours once the G6s start touching down around noon today.
Since a federal judge approved AT&T’s $85 billion takeover of Time Warner last month, dealmaking has hit a new level. Media watchers have long seen larger dominoes as likely to fall, with Sony, MGM and Lionsgate all attractive targets and a roster of hungry buyers headed by Verizon.
Just as Comcast awaited the AT&T-Time Warner outcome, so also will a lot of dealmakers in Idaho be biding their time until the Fox dust settles.