Home Business News Comcast Tops Disney With $65 Billion Bid for Fox Assets

Comcast Tops Disney With $65 Billion Bid for Fox Assets

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Fox’s key assets include its storied Hollywood studio, above; international pay-TV distribution; cable networks; and a stake in streaming giant Hulu


Photo:

mark ralston/Agence France-Presse/Getty Images

Comcast
Corp.


CMCSA -0.19%

on Wednesday offered to buy a big chunk of 21st Century Fox’s entertainment and international assets for $65 billion, kicking off a potential bidding war with

Walt Disney
Co.


DIS 1.90%

as the two media titans vie for supremacy in a business dealing with tumultuous change.

Comcast’s all-cash bid offers a premium of about 19% to Disney’s all-stock $52.4 billion offer, Comcast said. Fox said it received the offer and will review it, and that it hasn’t yet determined whether to adjourn the July 10 shareholder meeting. Representatives from Disney were unavailable for immediate comment.

The offer follows a federal court ruling Tuesday that approved

AT&T
Inc.’s

acquisition of

Time Warner
Inc.,

a decision industry executives and Wall Street viewed as allaying antitrust concerns regarding a Comcast bid for Fox. Fox’s board last year rejected Comcast’s original bid, even though it exceeded Disney’s offer then, because directors believed it was more risky with regulators and would require the sale of valuable assets that would reduce the value of the deal to Fox.

From AT&T and Time Warner to the hot pursuit of 21st Century Fox and Sky, media mergers are in full swing. Why now? WSJ's Amol Sharma answers all your questions about the forces driving media deals. Photo: Getty Images

The fight for Fox is part of a scramble by media, telecom and cable companies to get bigger as the superpowers of tech, from Netflix Inc. to

Facebook
Inc.,

have disrupted the old ways of doing business.

Increasingly, the old guard is focused on merging content with distribution and technology, believing that such combinations could help them aggregate valuable consumer data to appeal to advertisers and create streaming rivals for viewers rejecting the cable bundle. The deal between AT&T—the largest U.S. pay-television company and the No. 2 wireless carrier—and Time Warner, owner of HBO, CNN and the Warner Bros. studio, is a clear example of that.

The industry is moving toward “an end state maybe five years from now where three or four large, vertically integrated conglomerates with presence in wireline, wireless and content potentially compete with each other” and the Silicon Valley giants,

Barclays

analysts said Wednesday.

The Comcast-Disney battle for Fox includes some of media’s biggest power brokers, pitting Comcast Chief Executive

Brian Roberts

against Disney CEO

Robert Iger

for businesses long part of media titan

Rupert Murdoch’s

empire.

The Fox assets—which range from a storied Hollywood studio and international pay-TV distribution to cable networks and a stake in streaming service Hulu—are seen as prized entertainment properties, and Mr. Murdoch’s willingness to sell these assets came as a surprise to many in the media industry. (21st Century Fox and Wall Street Journal-parent News Corp share common ownership.)

The rare acquisition opportunity, combined with the need to significantly expand overseas and acquire new distribution and content, is adding a dimension of urgency for both Comcast and Disney.

Disney CEO Bob Iger with Fox’s Rupert Murdoch in a picture distributed by Disney in December, around the time a deal between the two companies was announced.

Disney CEO Bob Iger with Fox’s Rupert Murdoch in a picture distributed by Disney in December, around the time a deal between the two companies was announced.


Photo:

THE WALT DISNEY COMPANY/EPA/Shutterstock

Comcast is dealing with a declining pay-TV market at home and could find new growth with Fox’s international assets, including European and Indian streaming services, in countries where the penetration of cable services is lower.

For Disney, winning Fox would be a hedge against Silicon Valley companies like Netflix that have taken on traditional Hollywood by marrying technology with piles of cash to spend on production. Immediately, it would give Disney majority ownership in Netflix competitor Hulu and access to a new, deep library of Fox’s movies and shows, franchises like “Avatar” and “The Simpsons,” to make available on its planned streaming service.

Last week, Makan Delrahim, the Justice Department’s antitrust chief, seemed to indicate that Disney’s transaction didn’t raise major concerns. “They had good advice and carved out surgically…a transaction that might be doable,” he said on CNBC.

Both companies already have gamed out regulatory concessions they would be willing to make. Comcast and Disney are willing to divest Fox’s array of regional sports networks in the U.S., if their pursuits of Fox run into regulatory crossfire, securities filings and people familiar with the companies’ thinking said. Comcast is willing to match any other assets Disney offers up as regulatory carrots and would be willing to divest Fox’s Hulu stake if it became a flashpoint, people close to Comcast said.

Mr. Roberts and Mr. Iger’s history together has at times been contentious. In 2004, while Mr. Iger was president of Disney, the media company spurned a hostile takeover attempt by Comcast. And after Disney struck its agreement with Fox, Mr. Roberts made an informal offer earlier this year for one of the Fox assets—European pay-TV operator Sky PLC—knowing it could muck up their deal.

The two executives have taken different approaches to building up their companies. Mr. Roberts has done a series of mammoth, transformational deals over his career, including a $47.5 billion deal to buy AT&T Broadband in 2001 and a $39.4 billion acquisition of NBCUniversal earlier this decade.

Mr. Iger came to Disney with the company’s 1996 acquisition of ABC, a $19 billion merger that remained Disney’s costliest acquisition by far until the proposed Fox deal.

Since becoming CEO in 2005, Mr. Iger has gone for relatively smaller targets like Pixar Animation Studios, Marvel Entertainment and Lucasfilm Ltd., which offered Hollywood brands like “Black Panther” and “Star Wars,” and that have soared in value since coming into the Disney fold. Those three acquisitions added up to less than $16 billion, a fraction of the proposed Fox deal.

The intended audience for Comcast’s announcement is as much Fox investors as Fox management. Activist investor

Chris Hohn,

who has built up a 7.4% stake in Fox, has told Mr. Murdoch he would back a Comcast cash bid for Fox’s assets over the current deal with Disney. Mr. Hohn also told Mr. Murdoch he believes the Murdoch family could have a conflict of interest that would lead them to support the Disney bid, at a lower price, because the all-stock deal would be better for their taxes than the cash offer from Comcast.

Disney has maintained that it is moving forward through the regulatory process on its Fox bid, and Fox has set a July 10 meeting for shareholders to vote on the sale. That meeting will almost surely be delayed if Comcast makes a counteroffer that Fox shareholders need time to review, executives at both companies say.

If Fox’s board decides to take the Comcast offer to its shareholders, Disney can match the bid or counter with new terms, according to the terms set by its original merger agreement. The back-and-forth could stretch the bidding war out for months, according to people close to the process.

Write to Shalini Ramachandran at shalini.ramachandran@wsj.com and Erich Schwartzel at erich.schwartzel@wsj.com

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