Comcast makes $65 billion offer for Fox assets -- and this means war

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Credit: Illustration by Tam Nguyen/Ad Age. Composite images Bloomberg, istock

Comcast on Wednesday, as expected, announced a formal counteroffer for a huge swath of the 21st Century Fox assets, laying out a proposal for a $65 billion, all-cash deal. In so doing, the cable giant looks to eclipse the earlier offer from the Walt Disney Co. that was originally valued at $52.4 billion.

In a letter delivered today to Fox's board of directors, Comcast made a bid of $35 per share, which it said amounts to a 19 percent premium over Disney's all-stock offer. Comcast's bid likely will be the catalyst for a bidding war between the cable company, which owns NBCUniversal, and Disney.

Up for grabs are the FX and National Geographic cable network properties, as well as the Twentieth Century Fox film and TV studios. Also on the table are Fox's suite of 22 regional sports networks, which distribute local Major League Baseball, NBA and NHL games to roughly half the country's TV markets. The Fox broadcast network, Fox Sports and Fox News assets are not on the market; instead, these properties will be spun off to form a standalone entity colloquially referred to as "New Fox."

In the letter to the Fox board, which was addressed to Executive Chairman Rupert Murdoch and his sons Lachlan and James, Comcast Chairman and CEO Brian Roberts wrote that he believes his company is "the right strategic home" for the Fox businesses. "We were disappointed when 21CF decided to enter into a transaction with the Walt Disney Co., even though we had offered a meaningfully higher price," Roberts wrote. "In light of yesterday's decision in the AT&T-Time Warner case, the limited time prior to your shareholders' meeting, and our strong continued interest, we are pleased to present a new, all-cash proposal that fully addresses the Board's stated concerns with our prior proposal."

Roberts also noted that Comcast is "highly confident that [its] proposed transaction will obtain all necessary regulatory approvals in a timely manner." To sweeten the pot, Comcast also offered to reimburse Disney for the $1.53 billion break-up fee it would owe Fox upon dissolution of their original deal.

"Time is of the essence for your consideration of our proposal," Roberts wrote in the Murdoch memo. "We are available to meet at any time to answer questions of the Board, management or your advisor."

Under terms of the provisional Fox-Disney deal, the Murdochs must share any higher-value offer with the Mouse House and give it and CEO Bob Iger at least five business days to revise its original bid.

The impending brawl between the Philadelphia-based Comcast and Disney is likely to be a fast and furious one. A Fox board meeting scheduled for June 20 will be followed in short order by a July 10 shareholders meeting in which the Disney deal will be put to a vote. Comcast, naturally, would like to secure victory well before that comes to pass.

In a note to investors issued hours before Comcast made its formal offer, MoffettNathanson analyst Michael Nathanson allowed that while the decision in the AT&T-Time Warner case was perhaps the "least attractive" outcome for Disney, he believes that Iger and Co. enjoy a "superior balance sheet, cost of debt, equity and rationale to emerge victorious over Comcast in a bidding war."

In an early afternoon conference call with MoffettNathanson clients, Nathanson went on to say that victory in the bidding war will come down to sheer guts. "The question is, does Bob Iger have the will to follow Brian Roberts onto the Beach at Normandy?" Nathanson said. "Having observed Bob Iger for many years, Bob Iger is not someone to walk away."

Other Comcast watchers believe that the tactiturn Roberts will prevail by dint of a personal animus for Iger that may, in fact, be a figment of their own feverish imaginations. According to this theory, Roberts' desire to walk away with the Fox assets is in some way related to his thwarted hostile takeover of Disney back in 2004. Comcast's unsolicited offer for the Disney assets was valued at $54.1 billion.

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