Disney/Sky/Fox/Comcast update

Edited: June 5, 2018, 5:08 PM

For those of you keeping an eye on the Fox/Comcast/Disney saga...

...In our previous episodes, Disney made a take over deal for much of Fox's assets, including the film studio, and most overseas fox owned assets, including its stake the UK's Sky TV.

Sky TV is the premier pay tv operator in the UK and much of Europe, and is also a major ISP/Communications provider in many of the territories it operates.

Fox already was attempting to take over the part of Sky it didn't already own, and this had been previously referred to UK competition regulators

On the Disney announcement regulators indicated that they'd be disregarding the Disney bid for their purposes, and they had concerns over the influence Rupert Murdoch (through both Fox and News Ltd) would therefore have on the UK News and media landscape.

In order to allay these concerns, Disney offered to buy Sky's news channel first, ensuring its independence from the Fox group.

Not to be outdone, Comcast threw in a bid for Sky, and later a bit for the same assets as Disney plans to buy from Fox.

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In todays Episode, the relevant minister reported his intentions to the UK Parliament today:

On the Comcast proposal to take over Sky, he indicated that he had no objections. Comcast isn't really a major media player here yet, so there's no competition concerns.

On the Fox bid, the minister indicated that allowing Fox to buy Sky would not be in the public interest BUT if the Sky News channel was seperated and its financial future assured then he would have no objections to the bid (in Short, Disney's plan to buy Sky News, Fox to buy Sky, and then Disney to buy sky out of Fox, is a go for now - The official report does indicate that the Disney bid for Fox would have to be evaluated on its own merits later down the line).

So, this has set up a bidding war for sky between Fox/Disney and Comcast. A pre-show before main game between Disney and Comcast?

Replies (44)

June 6, 2018, 1:02 PM

It strikes me as funny that Comcast could own MSNBC AND Fox.

Edited: June 7, 2018, 7:46 AM

@RumbleMike - Except the acquisition of Fox assets by Disney does not include Fox News or the Fox Business Channel. Those entities would remain under the control of Rupert Murdoch. Similarly, any overture by Comcast would not include the entities Murdoch wanted to maintain.

June 6, 2018, 4:37 PM

Whoops! I let my imagination run around unchecked again. Thanks for clarifying Russell.

June 6, 2018, 6:03 PM

I do not know much about the regulatory system in the US, but that being said would this all depend on the outcome of the Time Warner/AT&T lawsuit with the US government trying to stop that buyout. The latest comments I saw didn't really indicate that Bob Iger at Disney was one of your presidents favorite people although he seems to get along wit Murdoch.

June 7, 2018, 7:56 AM

@Vaughn - The Time Warner/AT&T lawsuit is based on the potential monopoly of communications companies, not entertainment companies. The Disney acquisition of Fox does not include any network infrastructure in the US, unlike the Time Warner/AT&T merger, which includes Direct TV, AT&T's extensive broadband network, and Time Warner's expansive cable TV empire. Many feel there are already too few competitors in the distribution business, and merging TW with AT&T would reduce it even further, particularly in the northeast, where Direct TV is the only option to TW Cable service. The Disney/Fox merger appears to only be hung up on these European concerns involving Sky.

FWIW, Iger was positioning himself for a Presidential run in 2020 in what is assuredly going to be an incredibly crowded field until he started focusing his energy on the Fox acquisition.

Edited: June 7, 2018, 10:33 AM

Normally a a deal like Comcast or Disney buying most of Fox would be approved by a Republican president. But no matter your personal feelings of him, Trump is far from normal. AT&T buying Time Warner was cancelled in part because the government said AT&T could not own CNN. Trump has a very bad relationship with the entertainment industry, especially NBC News and MSNBC, so Comcast may not get approval because he doesn't want to help them.

Iger has also been critical of Trump, and has considered running for president himself. He was on Trump's economic group until Trump pulled out of the Paris Climate agreement, which was only a few months. Even though ABC News is very harsh toward Trump, as well as conservatives in general (one of the reasons I don't watch ABC News), I don't think there's enough bad blood for Disney being denied Fox. But I could be totally wrong. Only time will tell.

June 7, 2018, 12:20 PM

>>>Comcast may not get approval because he doesn't want to help them

If that’s the case, then the White Houses’ action is illegal. The White House/DOJ cannot block a merger simply on the basis they don’t like the personalities involved. This is basic rule of law stuff.

June 7, 2018, 12:46 PM

Russell, thank you for the clarification.

June 7, 2018, 8:56 PM

Chad the problem is it is hard to prove. The people at the Federal Trade Comission make the decision. There are valid reasons to deny Comcast the sale, And those would be the real reason it won't happen. Trump's bad relationship the the news media is just another reason to deny them Fox in addition to the legitimate ones.

Many people were shocked when the FTC under the Obama Administration allowed Comcast to buy NBC/Universal, so letting them buy another major film and TV company would not be heavily scrutinized. As much as people don't like Trump, even if its for the wrong reason many people would be happy if Comcast doesn't get any bigger. They have a very poor reputation as a cable and internet provider.

June 20, 2018, 11:56 AM

The Walt Disney Company has boosted its bid for the studio and cable network assets of 21st Century Fox to $71.3 billion in cash and stock.

June 20, 2018, 12:12 PM

...And Comcast topped that by raising its bid to four 10-day Disney World park-hoppers, with a 10-night Grand Floridian concierge-level stay and a four-pack of Premium Mickey Bars.

June 20, 2018, 2:01 PM

BREAKING: 21st Century Fox Inc. accepted a sweetened, $71.3 billion bid from Walt Disney Co. for its entertainment assets, outbidding Comcast Corp. in a battle for one of the media industry’s biggest prizes.

June 20, 2018, 3:06 PM

Comcast can still come back with a counter, and many analysts expect that to happen. Not a done deal yet...

Honestly, I think Comcast is a better fit with Fox to give it a better global footprint. Disney is taking a huge risk by assuming Fox's debt on top of what they already have. Disney is making a ton of money right now, but they're weighed down by that debt that is only going to get more expensive to service in the coming years as interest rates increase. A lot of well respected market analysts are advising investors to avoid companies with mountains of debt, and that corporate debt might be the next bubble to burst, causing a recession (Source - https://www.washingtonpost.com/business/economy/beware-the-mother-of-all-credit-bubbles/2018/06/08/940f467c-69af-11e8-9e38-24e693b38637_story.html?utm_term=.d55b08b3ad46).

June 20, 2018, 5:39 PM

Wall Street Journal: “Fox, in a news release, said the new Disney deal “is superior to the proposal” made by Comcast earlier this month. A Comcast spokeswoman had no immediate comment.”

June 20, 2018, 6:08 PM

Wall Street Journal: “So Fox and Disney can expect Comcast to come running back with a new offer. The question is how high it will go. Bidding could reach up to $80 billion, according to analysts. That could mean Comcast counters with a 10% premium or so on Disney’s latest bid, dangling Fox an offer in the low-to-mid $40s a share. (Disney’s new bid is $38 per share.)

“Fox shares rose nearly 8% on Wednesday in anticipation.”

June 21, 2018, 3:58 PM

CBR.com: "Comcast, which already owns NBC and Universal Pictures, among other assets, is expected to return to the table with another bid, and is reportedly looking for ways to line up additional financing without harming its credit rating. However, Moody’s has warned a downgrade is still possible.

"Even if the telecommunications giant (Comcast) were to emerge from the bidding war successful, with Fox shareholders agreeing to the merger, it will have amassed estimated debts of $170 billion."

June 23, 2018, 7:49 AM

Bloomberg 06/21/18: “Wall Street is girding for Comcast to counterbid with something around $41 or $42 a share in cash. But that would saddle the company with debt and threaten its credit rating. Disney may have another edge: It’s close to winning antitrust approval for its offer, according a person familiar with the matter. Comcast may not be able to offer Fox investors the same assurances.

“It all comes down to how badly Roberts wants the Fox properties, a sprawling array of entertainment assets ranging from “The Simpsons” to “X-Men.”

June 23, 2018, 5:03 PM

The New York Times on Disney: Moody’s Investors Service responded to the $10-a-share increase by putting the company’s debt “on review for downgrade.”

After crunching the numbers, the credit-rating service said a successful acquisition of both Fox and Sky at current bid prices would boost Disney’s debt/Ebitda ratio to 4.0x.

That compares with a ratio of 1.3x for Disney in 2017.

“Ratios higher than 4 or 5 typically set off alarm bells because this indicates that a company is less likely to be able to handle its debt burden,”

June 24, 2018, 9:51 AM

It will be interesting to find out the results of Moody's review.

June 24, 2018, 12:43 PM

It will also be interesting to see who wins this thing and at what cost. It seems that Roberts and Iger's hatred of each other is getting in the way of smart business. Definitely for Comcast and now Disney appears to be pushing their limits.

June 24, 2018, 12:54 PM

I'd hate to see either company get it, mostly because all that debt would kill future attraction development.

June 26, 2018, 3:03 PM

USA Today: "Twenty-First Century Fox says the sale of its movie and TV studios to Comcast faces more regulatory risk than one to original bidder Disney."

The article continues: "The Fox board expects a deal with Disney, which increased its offer last week to about $71 billion, would be "likely to receive required regulatory approvals and ultimately be consummated," while a transaction with Comcast carried "higher regulatory risk" and could be delayed or denied, according to a Securities and Exchange Commission filing."

Edited: June 26, 2018, 3:15 PM

CNBC: "Fox feared Comcast came with more regulatory baggage than Disney
Fox saw Disney as a safer bet in part because of its mix of businesses.
Comcast could have posed a greater problem, considering the deal would give it a controlling stake in Hulu."

The article continues: "21st Century Fox saw Disney as a safer regulatory bet than Comcast when deciding on competing bids, a Monday filing with the U.S. Securities and Exchange Commission reveals."

The article continues: " The registration document states that “while a potential Disney transaction was likely to receive required regulatory approvals and ultimately be consummated, a strategic transaction with Comcast continued to carry higher regulatory risk leading to the possibility of significant delay in the receipt of merger consideration as well as the risk of an inability to consummate the transactions.”

June 26, 2018, 3:28 PM

Bloomberg: "Disney CEO Bob Iger presented his new offer to Rupert Murdoch at a meeting in London on June 19. The next day, the Fox board discussed both Disney’s new offer as well as Comcast’s bid. Fox’s management team presented the key terms of each of the deals before the board voted in favor of the deal."

From the same article: "(According to a regulatory filing on Monday [06/25/18]) "A strategic transaction with Comcast would be subject to a greater degree of regulatory uncertainty, including the possibility of an outright prohibition and a higher risk of divestitures and delay to closing," Fox said. “A transaction with Comcast, given its asset mix, raised a significantly more difficult set of regulatory issues than a transaction with Disney.”

June 27, 2018, 8:02 AM

Wall Street Journal: "Comcast Corp. CMCSA -1.03% is exploring tie-ups with private-equity investors or strategic partners that could provide additional capital as the cable giant pursues a costly acquisition of 21st Century Fox’s entertainment assets, according to people familiar with the situation.

Comcast, which is bidding for the coveted media assets against rival Walt Disney Co. DIS -0.18% , has no immediate plans to tap such funding sources. But it may look to do so should the bidding reach extremely high levels—in the $90 billion range or so, the people said."

The article continues: "Comcast doesn’t feel pressure to act immediately, since Disney and Fox have indefinitely postponed a shareholder meeting previously scheduled for July 10, the people say."

June 27, 2018, 4:00 PM

Variety (Today) “Disney has agreed to sell off 21st Century Fox’s 22 regional sports networks to secure Justice Department approval of its acquisition of major 21st Century Fox assets. The DOJ’s sign off on the $71.3 billion transaction on Wednesday gives Disney a big leg up over rival Comcast in the battle to acquire the major portion of Rupert Murdoch’s TV and film empire.”

The article continues: “The Justice Department on Wednesday filed a complaint in federal court seeking to block Disney from acquiring 22 regional sports networks but announced a settlement agreement with Disney that calls for the divestitures.”

June 28, 2018, 8:12 AM

That's interesting TH, because it's the RSNs that made the deal make financial sense for Disney and the lagging performance of ESPN. The RSNs don't generate a lot of revenue independently, but represent some important broadcast rights that would mesh well with ESPN's current portfolio and allow them to further bury rival networks. The RSNs would fold into the ESPN family of networks, and enhance the viability of ESPN+ (the company's recently launched subscription-based streaming service). The RSNs were seen as the linchpin that made the Fox acquisition viable for Disney, because they represented a positive net revenue source that could help offset the hefty debt being assumed by Disney as part of the deal. Such a sell-off would have to be done at a loss, increasing the amount of debt assumed in the overall transaction, and likely strengthens Comcast's standing in the regional sports marketplace (unless they're sold off piecemeal, Comcast is the only company that would be able to purchase and operate all of the networks). Fox could buy these back as part of the deal since Fox Sports would still be under the Murdoch-owned entity, but it seems unlikely that they would make such a move, unless Disney essentially gives them away to secure regulatory approval.

Also, there doesn't appear to be any discussion of the other Fox Sports assets (like BTN, Pac-12 Network, Yes, and others). Those are not considered standard RSNs because of their nationwide footprint and broadcast requirements, so there's still a question as to how those will be handled in the transaction. My guess is that they will still fall under the Fox Sports umbrella, but everything about the future of Fox Sports seems to ignore the status of these highly profitable channels.

June 28, 2018, 9:35 AM

As soon as I read that they were shaking off the RSNs I thought of your previous, detailed post as to their real value.

Edited: June 28, 2018, 10:20 AM

This development is quite curious, because the entire impetus for the Fox acquisition was for content to bolster the upcoming Disney subscription-based streaming services. Fox has limited value as a production studio (only the Avatar sequels, which Disney already holds theme park rights to, and the Fox Marvel properties, which Disney already gets a cut of, are projected to be solid performers in the coming years), so the acquisition has always been about the ancillary properties (RSNs and other broadcast rights Fox owns like Hulu), bringing the X-Men and other Fox-owned Marvel franchises back under the Marvel umbrella, and the broadcast/streaming rights to the existing Fox content to support Disney's upcoming streaming services. This has always been about Disney taking Netflix (and to a lesser extent Amazon) head on, and not so much competing with Comcast. However, the RSNs were viewed as a way to soften the blow of the massive debt that would be assumed as part of the deal, and improve the lagging performance of ESPN at minimal cost.

ESPN has not revealed any details regarding the revenue generated to date from ESPN+ (launched only about 2 months ago), but my impression of the service is that it is seriously lacking content to warrant even the modest monthly cost (currently $5/month). Rolling the RSNs into the package would certainly make the platform more viable and attractive without having to undercut their existing content on their cable/satellite platforms.

June 28, 2018, 4:22 PM

And on and on ...

Reuters) - TCI Fund Management Ltd, a large Twenty-First Century Fox Inc (FOXA.O) shareholder, has urged Fox executive chairman Rupert Murdoch to give Comcast Corp (CMCSA.O) a chance to top Walt Disney Co’s (DIS.N) $71 billion offer to buy most of Fox’s assets, according to a letter reviewed by Reuters.

June 29, 2018, 2:09 AM

LA Times: "Turning up the heat on Comcast Corp., Walt Disney Co. and 21st Century Fox jointly set a new date — July 27 — for their shareholders to approve Disney’s proposed $71.3-billion takeover of Fox assets.

Thursday’s scheduling move, outlined in a regulatory filing, increases the pressure on Comcast to either raise its bid for the Fox assets or abandon its campaign."

July 1, 2018, 1:42 PM

Fox still has a huge library of TV shows and movies that Disney is glad to buy. Even with Marvel and Lusasfilm under their ownership, Disney is still focused in Family entertainment. Touchstone Pictures has become doormat, and Fox will end that problem.

I expect Disney to make an alternative deal to please regulators about the sports networks. One option may be selling a portion of the RSNs back to Fox, and maybe even selling the controlling stake of ESPN to another company. Disney could create a spinoff company that owns some of its stake in Hulu, and a controlling stake in ESPN and possibly the RSNs and or ABC, with Disney only keeping a 20% stake in Hulu, and the rest of Disney and Fox's stake going to the the new company. This way Disney could make some money to offset the debt from buying Fox, and getting some of the risk of operating television networks as the increasingly become less profitable.

Edited: July 2, 2018, 6:27 PM

From a site called Market Realist: "According to Fox’s management, Disney’s $71.3 billion proposal was expected to provide higher value appreciation to its shareholders than Comcast’s $65.0 billion bid. It would also give stockholders the option to choose cash or stock consideration. Disney’s bid also offers enhanced protections to address regulatory risk, which Comcast’s bid didn’t include."

The article continues: "Fox’s board noted that Comcast’s bid didn’t provide greater protection. The offer included a $2.5 billion breakup fee payable to Fox by Disney if the deal were blocked by regulators. It also included an ~$1.5 billion fee that Fox would be obligated to pay Disney if it terminated the Fox–Disney deal."

Edited: July 7, 2018, 12:49 AM

Markets Insider (07/06/18): But after Disney and 21st Century Fox agreed to the latest offer, Jefferies analyst John Janedis predicted that "given the strategic importance of the 21st Century Fox assets, we expect Comcast will come back with a higher offer." He predicted one that would value the 21st Century Fox assets at $80 billion.

And as of Thursday morning, Janedis isn't alone. In a note sent out to clients, (RBC Capital Markets analyst Steven Cahall) predicted Comcast could indeed make another bid. "Comcast will similarly approach Fox focused on post-RSN leverage so we wouldn’t be surprised to see Disney and Comcast bidding into the $40s," he wrote.

Note to Mr. Meyer (Also from the article): "Any buyer of the assets would have to divest the regional sports network."

July 6, 2018, 1:16 PM

Thanks for all the updates TH. Some day I'd like to buy you a drink at Disney Springs. I appreciate your efforts.

July 6, 2018, 5:43 PM

RumbleMike ... I think TH is a Universal fan, so you may want to take him to Citywalk Theme Park for drinks.

July 7, 2018, 11:42 AM

TH is a Theme Park Insider fan ... First and foremost.

From THE HILL (07/06/18): "The Walt Disney Company’s bid for much of 21st Century Fox could net Rupert Murdoch and his family $3.5 billion more than Comcast’s offer, according to an analysis of the proposals by Bloomberg.

According to the report, the Murdoch’s would be stuck with a $2.6 billion federal tax bill on their 17 percent stake in the company if it chooses to accept Comcast’s $65 billion all-cash bid. Murdoch and his sons Lachlan and James could get away with paying no taxes on Disney’s cash and stock offer."

July 9, 2018, 4:48 PM

Deadline Hollywood: "The sale of 21st Century Fox's studio assets to Disney has triggered the first lawsuit from a shareholder, who complains about what was filed with the Securities and Exchange Commission. The putative class action seeks to enjoin the transaction.

Robert Weiss, leading other shareholders, filed his lawsuit on Friday in Delaware federal court.

The lawsuit alleges that a proxy statement filed on June 28 omits or misrepresents the company's financial projections and the data underlying financial valuation analyses from Goldman Sachs and Centerview Partners. The complaint further contends that Goldman's potential conflicts of interest have not been adequately disclosed."

July 10, 2018, 12:53 PM

CNBC: "Comcast is identifying potential buyers for Twenty-First Century Fox's regional sports networks in an attempt to ease antitrust concerns about a new bid to acquire most of Fox's assets, people familiar with the matter told Reuters.

Comcast hopes that preparing now for such divestitures will ease Fox's concerns over potential antitrust risks and boost the chances of its bid disrupting Fox's agreed $71 billion cash-and-stock deal to sell the assets to Walt Disney, the sources said on Monday."

July 18, 2018, 11:17 AM

Looks like Disney beat Comcast again.

Forbes (07/17/18) by Jonathan Berr: "Looks like the battle royale that the financial press including yours truly was expecting between Walt Disney and Comcast over the entertainment assets of 20th Century Fox probably won’t happen. Instead, the Philadelphia-based media and entertainment giant looks like it's going to focus on acquiring Fox’s interest in the Sky U.K. pay television service."

The article continues: "Comcast has offered $34 billion for Sky, topping a $32 billion offer from Fox. Disney, though, is keen on Sky as well. CEO Bob Iger has called it one of the “crown jewels” of the Fox properties and isn't going to give up on Sky without a fight."

July 18, 2018, 12:32 PM

I'm glad it's looking like all the Marvel franchises will be under one roof again.

Though I can't help but feel like Comcast is bidding on this stuff just to make things more expensive for Disney. Maybe Comcast's long game was the Sky infrastructure assets more than the Studio or IP assets?

Edited: July 19, 2018, 9:11 AM

Wall Street Journal (and others) reporting Comcast has left Fox to Disney!

Let the theorycrafting begin!

July 19, 2018, 9:24 AM

(Reuters) - Comcast Corp said it dropped its pursuit of a group of media assets owned by Twenty-First Century Fox Inc on Thursday and will focus on its offer for European pay-TV group Sky Plc.

Shares of Comcast were up 2.2 percent in premarket trade, while Fox fell 1 percent. Shares of Walt Disney Co, which has agreed a deal to buy the Fox assets, were up marginally.

August 2, 2018, 11:15 AM

Deadline Hollywood: "A British court has ruled against a legal challenge of British media regulator Ofcom's conclusion that Sky would remain a "fit and proper" broadcast license holder if 21st Century Fox buys the remaining 61 percent stake in the European pay TV giant that it doesn't own yet.

An Ofcom representative confirmed the decision was handed down on Friday, saying, "We welcome the judgement, which found that Ofcom acted properly and fairly in carrying out all aspects of our ‘fit and proper’ assessment."

Justice Michael Supperstone in his decision wrote: "None of the grounds of challenge are made out. Accordingly, this claim is dismissed."

The decision clears a potential hurdle for Fox's pursuit of Sky. U.S. cable giant Comcast currently has the high bid for Sky, trumping a sweetened offer from Fox. But Fox, which has agreed to sell large parts of its business to Walt Disney for $71.3 billion, still has a chance to raise its bid by the middle of next week."

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