Disney Beats Out Comcast For 21st Century Fox with a $71.3 Billion Bid, Pending on Shareholders Vote
Disney's original bid for $52.4 billion was topped by Comcast with a $60 billion bid and later a $65 billion all cash offer. Disney has now encountered the bid with a larger bid of their own.
This could be the start of a bidding war between two media giants in Disney and Comcast. Disney raised its bid to $71.3 billion. A startling rise from its original offer of $52.4 billion. Fox is a essential ingredient in Disney's future plans. Disney plans to launch an OTT service that is seen as a formidable foe to Netflix.
Disney would be acquiring 21st Century Fox. Other Fox assets which include Fox Broadcasting Network, Fox News, Fox Sports, Fox Business, FS1, FS2, and The Big Ten Network will be spun off into a new company called New Fox.
Disney's reactionary bid comes after Comcast launched a surprising rival bid. Disney was getting a heck of a deal for 21st Century Fox at $52.4 billion. That alone is saying a lot because that type of money is still very good, and was impressive when the deal was announced. Comcast created the bidding war to get Disney to pay the fair market price. Comcast and Disney have had an interesting and intertwining history. Including Comcast's 2004 hostile takeover bid of The Walt Disney Company.
The deal comes at a time where movie and TV studios prep to face the challenges from new behemoths like Amazon, Netflix, and even "please forgive us even though we stole your data" Facebook. Changing the ways on how consumers absorb their content.
Comcast has declined to comment on Disney's sweetened offer. Fox's board and shareholders still can decide their bids.
"We are extremely proud of the businesses we have built at 21st Century Fox, and firmly believe that this combination with Disney will unlock even more value for shareholders as the new Disney continues to set the pace at a dynamic time for our industry,” said Rupert Murdoch, executive chairman of 21st Century Fox. “We remain convinced that the combination of 21CF’s iconic assets, brands and franchises with Disney’s will create one of the greatest, most innovative companies in the world.”
Here are the assets that Disney and Comcast are currently battling for. The assets include 20th Century Fox, Fox's film studio, as well as the cable group that operates FX Network, National Geographic, and several other cable channels and regional sports networks. Also included in the massive transaction is Fox's 30% of Hulu and its 39% in European satellite broadcaster Sky.
“After six months of integration planning we’re even more enthusiastic and confident in the strategic fit of the assets and the talent at Fox, At a time of dynamic change in the entertainment industry, the combination of Disney’s and Fox’s unparalleled collection of businesses and franchises will allow us to create more appealing high-quality content, expand our direct-to-consumer offerings and international presence, and deliver more personalized and compelling entertainment experiences to meet growing consumer demand around the world." Disney CEO Bob Iger said in a statement.
The overall mix of consideration paid to 21st Century Fox shareholders will be 50% cash and 50% stock. The stock consideration is subject to collar. Disney is expected to pay $35.7 billion in cash, and approximately issue 343 million new shares to 21st Century Fox shareholders, representing about 19% stake in Disney's pro forma basis.
More from Disney's official statement:
The collar on the stock consideration will ensure that 21st Century Fox shareholders will receive a number of Disney shares equal to $38 in value if the average Disney stock price at closing is between $93.53 and $114.32. 21st Century Fox shareholders will receive an exchange ratio of 0.3324 shares of Disney common stock if the average Disney stock price at closing is above $114.32 and 0.4063 shares of Disney common stock if the average Disney stock price at closing is below $93.53. Elections of cash and stock will be subject to proration to the extent cash or stock is oversubscribed. Disney will also assume about $13.8 billion of net debt of 21st Century Fox. The acquisition price implies a total equity value of approximately $71.3 billion and a total transaction value of approximately $85.1 billion (assuming no tax adjustment). Disney has secured financing commitments for the cash portion of the acquisition.
After the announcement Fox's shares went up 5%. Comcast fell down 0.5%. Fox has postponed their shareholders meeting on July 10. The final price tag can get up to $80 billion, if Comcast decides to bid again.
Since the AT&T and Time Warner merger was approved. Concerns about a Fox deal have now gone away. Assuming that the Justice Department will approve whatever suitor Fox decides to go with. This pits Comcast CEO Brian L. Roberts against Disney CEO Bob Iger who is known as master deal maker. Obviously considering the valuable intellectual property Iger has consumed during his tenure at Disney. Cherished brands that include Pixar, Marvel, and Lucasfilm. Not to mention Disney's purchase of BAMTech to improve their plans for their OTT direct-to-consumer service.
The first inklings of a Fox sale began August 9, 2017, when Rupert Murdoch, Executive Chairman of 21st Century Fox, and Bob Iger, Chairman and CEO of Disney, met in Los Angeles, California to discuss the current status of the industry. This conversation included market trends and challenges, and perspectives on the media landscape and operating environment. After reflecting on the growing challenges of a evolving media industry. Iger and Murdoch collectively came to the transaction of Disney purchasing Fox. Later that August, Murdoch felt the deal was feasible and they moved ahead in the process. On October 17, 2017, Disney executives met with the management of 21st Century Fox.
Fast forward to February 28, 2018, at a regularly scheduled meeting of the 21st Century Fox board, the board unanimously determined that the distribution is fair to and in the best interest of the shareholders . On March 8, Disney board approved the amendment to the combination merger agreement. On April 27, 21st Century Fox approved the merger agreement. Of course after all this took place Comcast came in hard to disrupt the Disney-Fox deal. Blowing the landscape away with astronomical bids. 21st Century Fox's price tag increased $20 billion. It could increase more if Comcast and Brian L. Roberts continue the bidding war.
Disney will be having a special meeting for Walt Disney Company stockholders. The special meeting will be held on July 10, 2018, at 10 a.m., at the New Amsterdam Theatre in New York, NY. Stockholders will get to vote on the deal.
One has to wonder if these assets will be worth it in the end. Does overpaying damage your business trajectory for years to come? Do you lose the magic you once had? As a Disney Reporter for Cultjer you start to wonder if the deal will end up backfiring. I mean this is a lot of money just to throw around even if it is for such valuable assets. The return matters a lot. Wall Street is also predicting that Comcast is going to counter-offer Disney's most recent bid. Resulting into the predicted bidding war. Variety reported the $80 billion price tag. Could assets end up getting split? I know Rupert Murdoch won't want that. He rather have one of the big titans like Disney or Comcast buy the entire thing. Murdoch and Fox want to be with Disney. They want their marriage to work, and then you have Comcast, lurking in the shadows as the crazy lover that will go to any lengths just to get Fox.
Fox will have to pay Disney a $1.5 billion breakup free if they back out of the deal. Disney is trying to pull out all the stops for Fox. Even Disney is now going to take on some of Fox's debt which includes $13 billion. If the Mouse House is able to purchase Fox they will gain access to a (almost) complete Marvel Cinematic Universe, Avatar and its sequels, The Simpsons, and much more.
It is obvious Murdoch wants Fox to end up at Disney. I mean he accepted a significantly smaller offer at first just to be acquired by Disney. His first discussions were with Bob Iger, and not Brian L. Roberts. That is a pretty clear sign. If I was a good prediction person I would ponder that Comcast is probably going to make a $75 billion bid for 21st Century Fox. I still think Disney is the right suitor for Fox. Although it is a weird match, it is another acquisition that could be separated in the company's expanding portfolio of new properties.
The media merger frenzy isn't happening just yet. Despite AT&T gobbling up everything, and Disney and Comcast fighting for a Fox. No other new suitors have decided to merge or potentially buy Fox. It will be interesting to see the landscape evolve once again post Fox deal. Plus what will Disney and Comcast sell off of the assets that they do acquire? (If one of them reaches the deal of course). Rumor has it, Fox Sports regional networks may get purchased by Discovery Scripps which owns Travel Channel and HGTV among others. Discovery could create a new enticing cable package for its audience.
This is long from over but it is another storied chapter in the escalating rivalry between Disney and Comcast. Rupert Murdoch's quest to becoming Scrooge McDuck will continue. Keep your eyes on Cultjer for more emerging news.
