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Disney raises its bid for Fox assets to $70.4B, escalates bidding war with Comcast

Disney raises its bid for Fox assets to $70.4B, escalates bidding war with Comcast

The battle between the Walt Disney Co. and Comcast for a collection of assets being sold by 21st Century Fox has escalated to the next level.

Disney on Wednesday raised its bid to $38 per Fox share in cash and stock, or about $70.4 billion, surpassing its original $52.4 billion overture made in December 2017.

Last week, Comcast joined the fray with an offer of $65 billion, about a 20 percent premium to Disney’s original bid, after a federal judge approved AT&T’s $85 billion acquisition of Time Warner. That decision sent a signal to media companies that regulators might look more favorably on consolidation of film and TV content by media companies also in the business of distributing content and providing broadband connections.

Fox is looking to sell many of its assets, including its TV and movie studios, channels FX and National Geographic and its 22 regional sports networks, to refocus the company on news and sports programming.

After Disney delivered its new offer, Fox executive chairman Rupert Murdoch – who along with sons Lachlan and James control Fox – said in a statement: “We are extremely proud of the businesses we have built at 21st Century Fox, and firmly believe that this combination with Disney will unlock even more value for shareholders as the new Disney continues to set the pace at a dynamic time for our industry.”

Wall Street analysts expect a heated bidding war between Comcast and Disney for Fox’s assets, which also include Fox’s 30 percent share of streaming service Hulu and a 39 percent stake in U.K.-based pay-TV and broadband provider Sky.

“I would expect Comcast has another bid in them,” said Mike Vorhaus, president of research and consulting group Magid.

“When you look at list of assets they are getting, there are very few you wouldn’t want.”

Comcast CEO Brian Roberts has made clear his interest in the Fox studios’ content and its international assets, which also include Mumbai-headquartered media company Star India Star. “We believe our proposed acquisition of Fox would not only enhance our domestic positions in distribution and content but would take us to global reach and additional growth in these businesses,” he said last week.

Fox’s movies and TV content – films such as “Avatar” and series such as “The Simpsons” – are vital to Disney, too. CEO Robert Iger has said Fox’s portfolio would enhance Disney’s planned subscription video service, expected to begin streaming in 2019.

Speaking Wednesday after Disney upped its offer, Iger said the acquisition would transform Disney into “a truly global entertainment company.”

The addition of Fox’s TV and movie studios, as well as channels such as FX and National Geographic, “will allow us to … deliver more exciting and personalized entertainment experiences to meet the growing demands of consumers worldwide,” he said.

Iger also said a Disney-Fox deal has a better chance of passing regulatory muster than a Comcast-Fox deal and cautioned those who thought the judge’s decision in the AT&T-Time Warner merger set the stage for an M&A free-for-all.

Comcast’s dominance in broadband and pay-TV along with its ownership of NBC Universal “is simply an apples-to-oranges comparison to what the Justice Department was considering when (it) considered the AT&T acquisition of Time Warner,” Iger said. “We believe that we have a much better opportunity, both in terms of approval and the timing of that approval, than Comcast does in this case.”

Indeed, Disney could be nearing approval from the Department of Justice, Bloomberg reported Wednesday, citing a person familiar with the situation.

Disney and Iger had to make this “smart strategic poker move,” Daniel Ives, head of technology research at market research firm GBH Insights, said in a note to investors Wednesday.

Successfully landing Fox’s assets “would put Disney in the catbird seat in terms of (being the) content king and with its streaming service set to launch in 2019 Iger has a clear runway to gain market and mind share from the likes of Netflix,” he said.

Should Comcast prevail, it would be “devastating” to Disney and it would be “hard to recover” with a successful launch of its streaming service, Ives said.

Fox has scheduled a July 10 shareholder meeting to vote on Disney’s merger.

Disney (DIS) shares were up slightly, about 0.7 percent Wednesday, to $106.86. Shares of 21st Century Fox (FOX) were up 6.4 percent in early trading to $47.11.

Comcast (CMSCA) stock was up also, about 0.6 percent to $33.02.

Brian Wieser, an analyst with Pivotal Research Group, agreed the Fox deal is vital to Disney in a note to investors this week. “Disney can still prioritize direct-to-consumer initiatives without Fox, but its propositions to consumers and creators of content would be stronger with Fox but weaker without those businesses,” said Wieser, who downgraded Disney shares from a Hold to Sell. “For this reason, the absence of a Fox transaction would be subjectively negative for Disney.”

The Comcast-Disney bidding war for Fox is just one of a wave of deals expected in the wake of the AT&T-Time Warner merger approval as longtime media and entertainment companies seek to strengthen their own positions countering newer, tech-savvy players such as Netflix, Amazon, Facebook and Google.

These machinations will mean a lot for consumers as media companies bolster their content collections for even better streaming services. “All of these deals are still just the beginning. They are the ones on the table now,” said Jim Nail, principal analyst for research firm Forrester. “I fully expect to see a whole lot more happening before the end of the year.”

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