Comcast Not Out of Contention for Fox?

Posted by Bret on 05/08/18 at 03:47 PM Category: Disney

According to multiple reports, Comcast is not going quietly into the night. After Fox Chairman Rupert Murdoch selected Disney's bid over that of Comcast to buy his company, Comcast is now looking to make another run at Fox. It seems that Comcast had made an all-stock initial offer of $64 billion for most of Fox's assets (minus the television and news divisions). Disney also made an all stock offer for $54 billion. According to CNBC:

Murdoch already agreed to take less money from Disney than Comcast, a sign that he sees a higher future value in Disney shares.

Besides preferring Disney's structure, some sources suggest that the Murdochs believe that owning a chunk of Disney shares carries more flair than owning Comcast shares. But most importantly, many see a Disney deal as standing more of a chance of surviving regulatory scrutiny versus a Comcast deal, since the latter already owns a significant cable distribution.

Comcast apparently decided that the prospect of owning Fox is too good to let pass. According to Reuters, as part of a new offer, Comcast is

asking investment banks to increase a bridge financing facility by as much as $60 billion so it can make an all-cash offer

This is interesting because this is less than their purported initial offer of $64B, but Comcast is hoping their cash is more appealing to Murdoch than Disney's stock. According to CNBC:

Murdoch, who owns close to a 17 percent stake in Fox and holds about 40 percent of the voting power, prefers to be paid in stock rather than cash for the Fox assets, because this makes the transaction non-taxable for shareholders, sources have said. It is not clear how receptive he would be to an all-cash offer

So this is not an offer that is really blowing anyone away - yet. If Murdoch prefers stock to cash, and Comcast is offering less cash than stock, it remains to be seen if this is something that changes the playing field. Fox would still maintain the same regulatory concerns as when Comcast made their initial offer. Also, it is important to note that Comcast appears to only be laying the groundwork for this offer, and won't officially extend it to Fox unless a U.S. District Court Judge rules against the Justice Department's block of the AT&T/Time-Warner deal. That ruling is expected in June. Presumably, Comcast would feel a ruling in support of that merger would indicate a clearer path for their own bid for Fox's properties.

CNBC has more on the possibility that Disney and Comcast can avoid a protracted bidding war by agreeing to split some of Fox's assets between them. Check it out.