The U.S. cable giant laid out its case in a 43-page proxy solicitation that is unambiguous in its position that Comcast’s $35 all-cash proposal is a better deal for Fox shareholders and seeks to apply pressure to the Fox board to consider the richer, $65 billion offer.
“We believe that a vote against the Disney merger agreement proposal will send a clear message to the 21CF board that you firmly believe the Comcast proposal is a superior proposal, that you do not want the proposed Disney transactions to be completed, and that the 21CF board should instead engage in good faith with Comcast to negotiate and execute definitive agreements with respect to the Comcast proposal,” Comcast said in a filing today with the SEC.
Fox issued a statement saying it’s still evaluating its next steps and hasn’t decided whether to suspend the scheduled July 10 shareholder meeting to vote on the Disney deal, in the wake of Comcast’s rival bid for most of its film and television assets.
In a conference call with investors that was accompanied by a 20-slide deck, Comcast’s top exec team polished up its pitch to Wall Street, positioning it not only as a higher offer but a more logical one. “These are highly strategic and complementary assets,” said CEO Brian Roberts. “We are in our minds the right buyer with the superior proposal and as much or better certainty and commitments and safeguards for Fox and the Fox board that are the same as those provided by Disney.”
Roberts also pointed to the lengthy track record of Comcast, a Philadelphia-based company that began as a collection of cable systems steered by Brian Roberts’ industry-legend father, Ralph. Since going public in 1972, Brian Roberts pointed out on the call, Comcast shares have generated average annual returns of 17.1%, compared with 10.5% for the S&P 500.
Debt, however, looms over the deal, especially with the company going after European pay-TV giant Sky. The Fox offer would put Comcast’s leverage at four times earnings, a very high level for a company that has been managed in a fairly buttoned-down manner.
NBCUniversal chief Steve Burke noted the upside of Fox’s international presence, which would boost Comcast’s international revenue from 9% of the whole to 27%. Plus, he called out franchises like Deadpool, Avatar, X-Men, Simpsons and Family Guy, as well as cable networks such as FX and National Geographic, which would give the company an enviably deep bench. Fox’s broadcast network is staying behind, so there would not be any concern about overlap with NBC, nor any need for FCC review of the deal.
For Comcast, this is Take 2 in approaching Fox. The Fox board rebuffed its more generous offer last December and picked Disney’s lower-value, $52.4 billion all-stock bid because it was viewed as the safer bet — especially in light of the Trump Administration’s Justice Department antitrust suit seeking to block the AT&T-Time Warner combination. Disney also offered break-up fees, should the deal fail to win regulatory approval.
“Each of these concerns has now been fully addressed,” Comcast argued, citing yesterday’s federal court decision that reaffirmed well-established legal precedent that such integrations of complementary businesses actually promote competition instead of stifling it.
Comcast also hammered home the pocket book issues: noting that an all-stock deal comes with “substantial risks” associated with price fluctuation. Comcast is offering a $10 billion premium in cold, hard cash.