Comcast announced last Wednesday that they were putting in a $65 billion offer, all in cash, for ownership of 21st Century Fox, challenging the Walt Disney Company.
The bid came a day after a federal judge gave the approval for AT&T to merge with Time Warner. According to Comcast executives, the company was waiting for the final decision of that case before moving forward with their offer. The offer, according to a statement from the company, is about 19% higher than Disney’s, and also includes a reverse break-up fee of about $2.5 billion, should the merger be blocked be the government.
This new bidding war between Disney and Comcast for Fox follows a similar one back in December, when Disney offered $52.4 billion in stock for Fox’s assets, after Fox rejected a $60 billion offer in stock from Comcast.
The history of monetary feud between Disney and Comcast goes back to 2004, when Disney rebuffed an attempt from Comcast to buy them out.
“Comcast seems hellbent on winning this time, and I think the narrative in Philadelphia is that Brian [Roberts, the CEO of Comcast] should have listened to his gut in 2004 and bought Disney,” media analyst and research firm Moffett Nathanson co-founder Craig Moffatt told The New York Times. “He seems very personally committed to this.”
Fox made a statement recently, telling the media that they were planning to review Comcast’s offer. Disney has not commented.
Only the future knows whether Disney will fight back. The company, under the lead of CEO Bob Iger, has in the past paid premiums for lucrative properties. Back in 2006, Disney bought animation studio Pixar for $7.4 billion, which after inflation translates to about $9.4 billion. At the time, the sale was criticized for being unreasonably high; now, however, it seems that Disney has more than made back the money that they had spent from Pixar.
According to a conference call last month, Iger’s plans to launch a streaming service, similar to Netflix or Hulu, were “not dependent at all on the assets we’re buying from Fox,” though certainly the Fox deal would help put Disney’s plans into motion much quicker.
Iger also agreed to delay his retirement from the position of CEO until 2021 as part of the deal. If Disney ends up making the Fox deal, it would be the capstone of what could be considered a near perfect track run, since his assumption of the position in 2005.
Rupert Murdoch, the executive co-chairman of 21st Century Fox, had previously rejected the offers because of worry that the government would block the merger, but the AT&T-Time Warner decision seems to have warmed his board to the possibility.
The announcement from Comcast had to be made as soon as possible. A vote is scheduled for July 10 for Fox’s shareholders to decide on the Disney merger, but should the board support the Comcast offer, the vote will be delayed, and Disney will have five days to come up with a counter bid.
In a 700 word letter to Murdoch and his sons – Fox CEO James and executive chairman Lachlan – Roberts wrote that he “long admired what the Murdoch family has built,” and that Fox’s decision to potentially merge with Disney “disappointed” him.”
“In light of yesterday’s decision in the AT&T/Time Warner case, we are pleased to present a new, all-cash proposal that fully addresses the board’s stated concerns with our prior proposal,” continued Roberts.
By: Matthew Silkin