If Comcast Loses Fox to Disney, CEO Brian Roberts Still Has Options

Lionsgate is the content target analysts like most for Comcast

Brian Roberts Comcast
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Comcast’s hopes of snatching the rug out from under Disney’s planned acquisition of Fox’s film and TV entertainment assets are dwindling.

Earlier this week, the Department of Justice signed off on Disney’s $71.3 billion proposal to buy Fox’s assets. The DOJ told TheWrap that it has started analyzing a potential Comcast bid as well.

Conventional thought holds that Comcast will come back with a new offer that improves on its initial $65 billion bid and rivals Disney’s current offer. But time is running out. Fox’s board of directors has set a meeting for July 27 where shareholders will vote on whether to approve the Disney deal, and Fox is urging shareholders to push it through.

“Disney is in a strong position,” Villanova business professor Mary Kelly told TheWrap. “This is going to be really hard for Fox shareholders to walk away from.”

Comcast CEO Brian Roberts made it clear in a letter to Fox Chairman Rupert Murdoch and his sons how much he wanted the assets they had agreed to sell.

“We have long admired what the Murdoch family has built at Twenty-First Century Fox. After our meetings last year, we came away convinced that the 21CF businesses to be sold are highly complementary to ours,” Roberts wrote in the letter dated June 13. “So, we were disappointed when 21CF decided to enter into a transaction with The Walt Disney Company.”

But if Comcast has to start considering life without Fox, it might not be so bad, Kelly said. Losing this one could actually be better for Comcast, she added.

There are a number of companies out there that could become acquisition targets, and likely for much less than Comcast would have to pay to make a play for Fox.

“If they really need to go after content to make their direct-to-consumer offering more relevant, there are some smaller studios that could be good,” Kelly said. “For me, I like Lionsgate; they would be top of my list.”

CFRA media analyst Tuna Amobi also said Comcast moving to buy Lionsgate would make sense.

In a blog post on Tuesday, Kelly wrote that Sony, Lionsgate, and Viacom (Paramount) — the number five, six, and seven best-performing studios at the box office on average since 2013 — were the most likely targets for anyone shopping for content.

Lionsgate, which boasts a library of 16,000 film and TV titles along with its Starz cable network, has said it would be open to being acquired.

Viacom is now mixed up in a messy battle between CBS CEO Les Moonves and Shari Redstone — who owns roughly 80 percent of CBS and Viacom through her family company, National Amusements. As a result, it’s possible buyers will steer clear of Viacom for now, Kelly said.

Roberts is no stranger to mergers and surprise, unsolicited bids to buy companies. Comcast is seemingly always on the lookout for opportunities to scale its business. In fact, in 2004 he even went after Disney, offering $54 billion for the company, which was in the midst of a battle to oust then-CEO Michael Eisner. That offer was rejected.

Comcast bought NBCUniversal for roughly $50 billion in 2013, and had to pull the plug on a proposed $45.2 billion offer for Time Warner Cable in 2015 due to regulatory concerns. And more recently, the company bought Dreamworks for $3.8 billion.

Amobi argued that Comcast shouldn’t feel forced to go out and aggressively bid for another asset if it doesn’t win Fox.

“This was something that just happened to come on the market, and I think following AT&T-Time Warner it was an opportunity they couldn’t pass up,” the CFRA analyst said. “I don’t think there’s any asset on the market that offers the kind of value that Fox did. Whenever something like this comes up, there are only a few companies big enough to go after it.”

But on the flip side, media companies are now entering a post AT&T-Time Warner merger world. And Comcast may not need to fight for another company as hard as it has for Fox.

“If there’s content on the market, I mean, I’m sure they’ll take a look,” Amobi said. “There’s probably going to be a bidding war for any of the content companies that go into play. Even companies that aren’t technically on the block have to disclose if there’s a bid.”

Of course, Comcast has already planted its flag in U.K. broadcaster Sky. The cable and entertainment company made a big play for Sky, offering $31 billion for 100 percent of the company, whereas Fox bid $16 billion for the 61 percent it doesn’t already own.

The U.K. government said earlier this month that it wouldn’t oppose or hinder Comcast’s offer for the British media company.

“[Buying Sky] is a good move for Comcast,” Kelly said. “They know the business, they just don’t know the market, the regulatory landscape. As a pay-tv distributor in the U.S., the Sky assets make way more sense with Comcast and see them really bolster international business.”