Comcast opens Disney bidding war with $65bn Fox offer

Fox shareholders to be offered $35 a share in cash for its film and television studios, cable entertainment networks

The Murdoch family had spurned a takeover offer from Comcast in favour of a less valuable all-stock bid by Disney last December, calculating that a deal with the owner of Pixar and Marvel Studios would face less regulatory risk and create a limited tax liability for Fox shareholders.

The Murdoch family had spurned a takeover offer from Comcast in favour of a less valuable all-stock bid by Disney last December, calculating that a deal with the owner of Pixar and Marvel Studios would face less regulatory risk and create a limited tax liability for Fox shareholders.

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Comcast has launched a $65 billion (€55 billion) takeover bid for some of the marquee assets of Rupert Murdoch’s 21st Century Fox, gatecrashing the media billionaire’s agreed deal with Walt Disney and setting the stage for a bidding war.

The long-awaited proposal by Comcast, which had previously declared its intention to top a $52 billion stock offer from Disney, came a day after a federal judge rejected an attempt by US antitrust authorities to block AT&T’s purchase of media group Time Warner.

Networks

Comcast said it would pay Fox shareholders $35 a share in cash for its film and television studios, cable entertainment networks, its stake in internet streaming company Hulu, as well as international holdings such as Star India and a 39 per cent stake in pan-European broadcaster Sky.

The Philadelphia-based company led by Brian Roberts, chief executive, said the offer amounted to a 19 per cent premium to the current value of Disney’s bid. The $65 billion offer is the largest all-cash bid ever made, according to data provider Dealogic. Fox has $13.5 billion of net debt on its books.

Media companies and telecommunications providers are racing to consolidate as they try to fend off competition from technology groups such as Netflix, Amazon and Google in the battle for market share.

“This is what we do well,” Mr Roberts told reporters in a call, citing how his dealmaking prowess had taken the family company from being a small regional cable group to a dominant provider of cable television access, broadband internet and content producer with its NBCUniversal news, TV channel and movie studio arm.

In an open letter addressed to Mr Murdoch and his sons Lachlan and James, Mr Roberts said: “After our meetings last year, we came away convinced that the 21st Century businesses to be sold are highly complementary to ours, and that our company would be the right strategic home for them.”

Fox said its board would “carefully review and consider” the offer from Comcast in consultation with its advisers and that it had not yet made a decision to postpone or cancel the July 10th meeting for a shareholder vote on the Disney deal.

Disney has five days to match Comcast’s offer, according to people with knowledge of the deal conditions. Analysts and investors fully expect it to return with a higher offer. As part of the initial deal with Fox, Disney chief executive Bob Iger — who had been linked to aspirations for a presidential run — announced he would forgo plans to leave the company and would stay until 2021 to see through the deal.

Offers

Each of the offers on the table allow Rupert Murdoch and Lachlan Murdoch to form a new company comprised of Fox’s broadcast network as well as its news, sports and business cable channels.

The Murdoch family had spurned a takeover offer from Comcast in favour of a less valuable all-stock bid by Disney last December, calculating that a deal with the owner of Pixar and Marvel Studios would face less regulatory risk and create a limited tax liability for Fox shareholders.

To address Mr Murdoch’s concerns, Comcast said it was willing to match the regulatory commitments that Disney made to Mr Murdoch’s company, including the payment of a $2.5bn termination fee payable to Fox should a deal be blocked by regulators. It has also offered to pay the $1.5 billion fee that Fox would owe Disney should it walk away.

Comcast said it was “highly confident” in its ability to finance the transaction, adding that it had lined up Bank of America Merrill Lynch and Wells Fargo to help fund its bid. The Wall Street banks were not, however, committed to the transaction, and could back out if markets turn.

Deal

Comcast also said it would continue to pursue in parallel a deal to acquire the 61 per cent of Sky that is not owned by Fox.

Christopher Hohn, the activist investor behind hedge fund TCI, revealed last month that he had built a 7.4 per cent stake in Fox and said it was imperative for the media company to sell to the highest bidder.

Mr Hohn wrote in a letter to Fox directors in May that he was “aware that the Murdoch family has a potential conflict of interest because of capital gains tax, which could lead them to preferring a lower priced Disney stock offer, to a higher priced offer from Comcast”.

Shares of Fox, which has a market value of $81bn, slipped 0.3 per cent to $43.54 in after-hours trading on Wednesday. Comcast shares declined 0.4 per cent to $32.20, weighing slightly on its $148bn market capitalisation. Walt Disney stock was little changed at $106.05, valuing the company at $158 billion.

Copyright The Financial Times Limited 2018

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