By Bloomberg
June 13, 2018

Comcast Corp. made a long-awaited offer to acquire much of 21st Century Fox, topping a previous proposal by Walt Disney and setting up a bidding war for Rupert Murdoch’s media empire.

Comcast, the largest U.S. cable-TV provider, said its cash offer reflects a $65 billion value for Fox’s entertainment assets. At $35 a share, the bid represents a 19 percent premium over the Disney offer, the company said on Wednesday.

The move follows AT&T’s victory over the Justice Department in its antitrust battle to take over Time Warner. That outcome is expected to spur a wave of media consolidation, emboldening companies to make offers they might otherwise have skipped.

QuickTake

Disney and Comcast are locked in a high-stakes contest for the entertainment assets, which include the Fox movie and TV studios, television networks such as FX, and multichannel providers like Star India and Sky. With Wednesday’s bid, Comcast Chief Executive Officer Brian Roberts is seeking to disrupt Disney CEO Bob Iger’s plan to use Fox properties to bolster his company’s already-vast entertainment offerings.

Comcast first approached Fox last year with an informal proposal. Comcast bid 16 percent more than Disney for Fox’s media properties, but that offer was deemed too risky.

Breakup Fee

Murdoch, 87, also wasn’t swayed by Comcast’s overtures partly because the cable company didn’t offer a breakup fee. Comcast said last month that its new offer would be at least as favorable to Fox shareholders as Disney’s terms. Indeed, the proposal unveiled on Wednesday include a $2.5 billion termination fee. Disney made a $52.4 billion all-stock offer for Fox, which was accepted in December. Comcast’s official counterbid now pressures Disney to come up with a higher offer for Fox — lest it have compelling entertainment assets slip through its hands at a time when technology giants are storming Hollywood, forcing traditional media companies to bulk up.

In recent weeks, Philadelphia-based Comcast confirmed its desire to outbid Disney in advance of shareholder votes set for July 10. The cable provider planned to approach Fox investors and has told the Justice Department of its interest, an early step in addressing potential antitrust concerns, according to a person familiar with the matter.

Comcast already owns film and TV studios, broadcast and cable TV operations including the NBC and USA networks, and the Universal Studios theme parks.

Streaming Ambitions

Both Disney and Comcast could use Fox’s TV and movie properties to stream more content directly to consumers and compete with Netflix Inc. Both are also interested in expanding internationally at a time when the U.S. television business is slowing.

When a federal judge rejected the Justice Department’s suit against the Time Warner, it was seen as an endorsement of so-called vertical mergers — combinations that include both media distribution and the programming itself.

Comcast also is making an ambitious push in Europe that centers on U.K. pay TV provider Sky. After Fox made a takeover offer for the 61 percent stake in Sky that it doesn’t already own, Comcast launched a 22 billion pound ($30 billion) counterbid for the business. Disney also is interested in owning Sky.

But Comcast investors haven’t welcomed the company’s sudden appetite for megadeals. Its shares were down 19 percent through Tuesday. If Comcast buys Fox and Sky, the cable giant could become America’s largest corporate borrower and its credit ratings may teeter at the bottom edge of investment grade.

Like many media cable and media companies, Comcast has two classes of stock that vest extraordinary voting rights on its founding family. Roberts, the CEO, owns all of the Class B super-voting shares, giving him 33 percent of the voting rights.

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