When Walt Disney (NYSE: DIS) announced in December that it had reached an agreement to buy most of Twenty-First Century Fox (NASDAQ: FOX )  (NASDAQ: FOXA) the rumor factory went into overdrive almost immediately. While Comcast (NASDAQ: CMCSA) was also known to have been in negotiations for deals, it was the Disney offer that won.
The House of Mouse agreed to an agreement valued at $ 52.4 billion, after the spin-off of certain Fox news and sports networks. The merger seemed a natural fit, given that the assets involved align well with the studios Disney movies, television stations, cable properties and broadcasting ambitions.
That did not sit well with Comcast, which had allegedly made a higher offer. Disney – and now, the cable giant is responding.
After much speculation that it could try again to play the spoiler, Comcast finally released a statement detailing its intentions:
Comcast confirms that it is considering, and is in advanced stages of preparation , an offer for the companies that Fox agreed to sell to Disney … Any offer to Fox would be all in cash and worth more than the value of Disney's current stock offer … [and] would be at least as favorable for Fox shareholders as the Disney offer.
The company also said that although its offer has not been finalized, both the plans necessary to finance it and the required regulatory submissions were "very advanced". Reports indicate that Comcast has arranged approximately $ 60 billion in financing to support a cash offer.
It is not the first time that
Fox rejected a previous offer from Comcast that was 16% higher than Disney's, citing "significant risk of exposure to a variety of negative outcomes," including the potential for greater Regulatory control and an additional tax obligations if the combined company were forced to get rid of certain properties to obtain government approval for the merger.
During Fox's teleconference of earnings earlier this month, Chief Executive Lachlan Murdoch said his company "was not going to comment on market speculation." "When an analyst later insisted on whether Fox would consider" competitive bids, "Murdoch said:" We are committed to our agreement with Disney and are working on the conditions to bring it to a close … our directors, however, know their duties. fiduciaries on behalf of all shareholders. "This probably means that the company would be forced to give fair consideration to a competitive offer
A bidding war?
In a recent interview, Disney CEO Bob Iger said Fox's board had already unanimously approved his company's offer, "I'm sure [the deal] will finally move forward." At that point, he said it was "too early" to speculate about the possibility of a bidding with Comcast also suggested that an agreement with Disney had better prospects of receiving approval from government regulators around the world. were made before the announcement of Comcast, the opinion of Iger on the subject probably has not changed.
Comcast also made an offer of $ 31 billion for Sky, a 16% premium to a previous offer made by Fox, which already owns 39% of the European broadcaster. The measure would increase Comcast's share of international revenues from 9% to 25% of its total. Fox's offer is still pending approval by UK regulators. Earlier this week, the British media minister said that the Comcast offer will probably not require a similar regulatory review.
Positioning to compete better in a new world
Each company that competes for Fox's assets is an international source of content creation and distribution, but the winner will significantly strengthen its position, allowing it to compete better in a media environment that is undergoing a paradigm shift. Consumers are increasingly abandoning the expensive cable packages and the programmed aspect of linear TV for cheaper and less expensive data transmission options.
Investors should be vigilant: this scandal could become an argument of several episodes.
Danny Vena owns Walt Disney stock and has the following options: since January 2019 $ 85 calls to Walt Disney. The Motley Fool owns shares and recommends Walt Disney. The Motley Fool has a disclosure policy.