A judge’s approval of AT&T’s acquisition of Time Warner on Tuesday could set up a bidding war between Comcast and Disney for 21st Century Fox’s key assets, analysts and M&A experts said.
Last month, Comcast confirmed it is “in advanced stages” to prepare an “all-cash” offer superior to Disney’s $52.4 billion bid. It is widely expected that Comcast will formally submit its bid sometime within the next 24 to 48 hours. Comcast’s bid will likely be around 25-30 percent higher than Disney’s, according to multiple analysts, which would make it around $65 million.
With U.S. District Judge Richard Leon shooting down the Trump Justice Department’s antitrust arguments over AT&T’s $85.4 billion acquisition of Time Warner, many expect an open season for the M&A sector — starting with the Fox assets.
Tuna Amobi, director and senior equity analyst at CFRA Research, noted that the swift rise in Fox’s stock price — up 6.83 percent to $43.15 per share at 6:26 p.m. ET in after-hours trading — following the judicial approval of AT&T-Time Warner merger signals the likelihood of a bidding war for the Fox assets.
Disney shares are down 1.85 percent to $102.40 per share as of 6:26 p.m ET, a sign that the media giant faces credible competition for assets that once seemed safely within its grasp.
The question now is whether Disney, having gone this far down the road on the Fox acquisition, will up its own offer. “Disney has a relatively clean balance sheet and a healthy stock price,” Todd Klein, partner at Revolution Growth, told TheWrap. “They could substantially improve bid if they wish.”
Last December, Disney announced a deal to acquire much of 21st Century Fox for $52.4 billion in stock. The buyout infuses the Mouse House with a bevy of Fox properties, including its film and TV studios and much of its non-broadcast television business, including regional sports networks and cable networks such as FX, FXX and Nat Geo.
The Fox acquisition was seen as key for Disney as it prepares to launch its own streaming service next year to rival Netflix, and getting the Fox assets, which include film and TV franchises like “X-Men,” “Avatar,” “Deadpool,” “Fantastic Four” and “The Simpsons,” could be the last piece of the puzzle.
“Disney needs a significant number of subscribers willing to fork over $8-$9 per month to overcome the termination of its licensing agreement with Netflix,” Mary Kelly, associate chair of economics at Villanova School of Business, said. “I don’t think the Fox content is as important to Comcast.”
Comcast had explored buying the Fox assets back last December, floating an offer of roughly $60 billion, but Fox leaned toward Disney’s lower dollar-value bid amid concerns over possible antitrust issues.
“It feels like Comcast is being a ‘fly in the ointment’ to Disney’s efforts to obtain more content,” Kelly said.
But how high is Disney willing to go? “Iger will pull out the lightsabers to protect Fox,” Eric Schiffer, CEO of The Patriarch Organization and chairman of Reputation Management Consultants, told TheWrap. “Iger would rather lose Mickey Mouse’s right arm than lose Fox to Comcast.”
Comcast already tried to throw a wrench into the deal by submitting a bid for British pay-TV company, Sky. Fox is attempting to purchase the remaining 61 percent of Sky that it doesn’t already own and its stake was supposed to be part of the sale to Disney. In April, Comcast made a formal cash offer that valued Sky at $31 billion, a 16 percent premium over Fox’s offer.
If Fox doesn’t get Sky, Disney would be on the hook to make an offer itself for all of Sky. However, a Fox insider told TheWrap the deal with Disney is not contingent on what happens with Sky.
If Disney did end up on the losing side to Comcast in its bid for Fox, Klein argues they wouldn’t just sit around licking their wounds. The approval of the AT&T-Time Warner merger with no conditions signals that there will be a slew of deal making on the horizon, with more studios looking for buyers.
“Disney would have a shot at other studios,” said Klein. “There will be more assets available. This is just a premier one.”
For Comcast, Klein sees no downside to an attempt to out-flank Disney. “The worst thing that happens is a competitor paid more.”
Trey Williams contributed to this report.