CMCSA Comcast Corporation

By Shalini Ramachandran and Ben Fritz 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (April 19, 2018).

21st Century Fox Inc. rejected an acquisition offer for its entertainment assets from cable giant Comcast Corp. largely over antitrust concerns, a regulatory filing said, even though the bid was 16% higher on a per-share basis than what Walt Disney Co. ultimately agreed to pay.

After extended discussions, Fox's board decided that Comcast's offer was too risky to accept, according to the filing. Fox was concerned such a deal might not pass muster in Washington, and even if it did, it would require divestiture of valuable assets that would reduce the value of the deal to Fox. Comcast also didn't offer Fox a breakup fee in the event regulators didn't bless the deal, according to the filing.

Disney's all-stock deal with Fox, reached in December, valued the Fox assets at $29.54 a share based on the last trading day before it was announced. The filing said a company described as "Party B" offered an all-stock deal valued at $34.41 per share as of November. A person familiar with the matter confirmed that Party B is Comcast.

Verizon Communications Inc. also showed interest in making an all-stock bid for Fox assets, according to the filing, but Fox said it would have been without "any meaningful premium" to Fox shareholders. Verizon was described in the filing as Party A, the person said.

Fox didn't set a date for a shareholder vote in the filing.

By laying out the back-and-forth with Comcast, Fox is spelling out for shareholders why it rejected a higher-value offer. In its $52.4 billion deal with Disney, Fox agreed to sell its television and film studios; cable networks; international assets including Star India and its stake in European operator Sky PLC; its stake in streaming service Hulu; and its 22 regional sports networks. The Disney deal valued Hulu at $8.73 billion, the filing said.

The Wall Street Journal reported in February that Comcast had submitted a bid for Fox's assets that was more than 15% higher than Disney's.

21st Century Fox and Wall Street Journal parent News Corp share common ownership.

Details of Comcast's bid add to the intrigue as media companies seek to expand their holdings globally in a consolidating industry and better compete against tech giants such as Netflix Inc.

Fox and Comcast are tussling over control of European pay-TV operator Sky. Fox, which owns 39% of Sky, has been seeking to take full control but has faced a lengthy regulatory review. In February, Comcast launched an informal $31 billion offer for all of Sky that would top Fox's, but Comcast has yet to formalize its bid. The cable company has been waiting to do so for regulatory and strategic reasons, and because it is keeping its options open about continuing to pursue Fox, people familiar with Comcast's thinking said.

Earlier this month, Fox told U.K. regulators that Disney has offered to buy Sky News to help Fox win regulatory approval.

21st Century Fox Executive Chairman Rupert Murdoch and Disney Chief Executive Robert Iger first discussed the possibility of a combination in early August 2017, while talking about media trends during a meeting in Los Angeles, according to the filing. A first round of talks stalled over price. When reports of the Disney-Fox talks surfaced in November, Comcast Chief Executive Brian Roberts jumped in, reaching out to Mr. Murdoch to propose a deal of his own. Talks between Fox and Disney restarted soon after that.

Fox's lawyers advised that Comcast's track record with antitrust authorities could mean a deal would run into significant hurdles in Washington, according to the filing. Comcast sought to assuage Fox's concerns by offering that any assets that raised red flags to regulators, along with the corresponding tax burden, would be allocated to New Fox, the company left behind after the sale. That raised concerns for Fox executives and advisers, who felt that such a plan could incentivize Comcast to agree to divestitures that would ultimately narrow the scope of the deal and potentially reduce the return for Fox shareholders.

As talks progressed, Comcast offered other carrots, including that it would agree to any proposed behavioral remedies offered to regulators by AT&T Inc. in its pursuit of Time Warner Inc., and that it would bear 50% of some tax costs of potential divestitures. It even offered to allow Fox a "unilateral termination right" if the AT&T-Time Warner deal was enjoined in court. Mr. Roberts made a last-ditch effort to save the deal in a New York City meeting with Mr. Murdoch on Dec. 4, but continued to hold firm that Comcast wouldn't agree to pay a breakup fee.

After considering the antitrust risks at a Dec. 6 board meeting, Fox decided to cease talks with Comcast. A week later, Fox sealed its deal with Disney.

Corrections & Amplifications Disney's all-stock deal with Fox valued the Fox assets at $29.54 a share based on the last trading day before it was announced. An earlier version of this article incorrectly stated the deal valued the entire company at $29.54 a share.

Write to Shalini Ramachandran at shalini.ramachandran@wsj.com and Ben Fritz at ben.fritz@wsj.com

(END) Dow Jones Newswires

April 19, 2018 02:47 ET (06:47 GMT)

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