By Shalini Ramachandran and Austen Hufford
Cable giant Comcast Corp. said it is in advanced stages of
preparing a higher, all-cash offer for the assets of 21st Century
Fox that Walt Disney Co. has agreed to buy, an effort it made
public Wednesday to convince Fox shareholders of its
seriousness.
Earlier this month, The Wall Street Journal and others reported
that Comcast was considering making a play to break up that $52.4
billion all-stock Disney deal and had lined up around $60 billion
in financing for an all-cash offer.
Comcast said Wednesday that while no final decision has been
made, the work to finance the offer is well advanced. The company
also is preparing to begin talks with Fox shareholders, a person
close to Comcast said.
Comcast has been contemplating a renewed pursuit of Fox's assets
since the deal with Disney was announced in December at a lower
price than Comcast had offered. For both Comcast and Disney, the
pursuit of Fox is a gambit to better compete against Netflix Inc.
and other global tech giants as the American pay-TV landscape comes
under pressure.
One factor in whether Comcast proceeds with a renewed offer for
Fox is the outcome of the government's lawsuit to block the merger
of AT&T Inc. and Time Warner Inc., the Journal has previously
reported.
Comcast made the announcement Wednesday about its preparations
because its executives were worried that Fox and Disney might rush
a shareholder vote before the decision on the AT&T-Time Warner
deal came down, according to people close to Comcast. A decision in
the AT&T case is expected by June 12.The dates for the Disney
and Fox meetings haven't yet been announced.
The cable giant wanted to send a message to Fox shareholders
that it is serious about an all-cash offer and about allaying the
Fox board's concerns about an earlier Comcast offer, one of the
people said.
In an April filing, Fox said it received a bid from a rival of
Disney that people familiar with the matter identified as Comcast.
That bid was 16% higher than Disney's on a per-share basis, but Fox
rejected it based on regulatory risk, concerned such a deal would
require the divestiture of too many valuable assets, according to
the filing.
Comcast tried to calm those concerns in Wednesday's statement,
saying that the structure and terms of any offer, including the
regulatory risk provisions and termination fee, "would be at least
as favorable to Fox shareholders as the Disney offer." Paying a
termination fee would be a change from Comcast's earlier stance. In
negotiations with Fox last year, Comcast Chief Executive Brian
Roberts wouldn't agree to pay a breakup fee -- a key point of
contention that helped derail the talks, the filing and people
familiar with the situation said.
The cable giant is still likely to wait until a judge rules on
the AT&T deal before making a formal offer, since the
government's fight against AT&T was a key concern for Fox's
board, people close to Comcast said.
Comcast executives believe the antitrust trial went favorably
for AT&T.
Even if the ruling is unfavorable for AT&T, Comcast may
proceed with its Fox pursuit, one of the people said. The cable
giant's executives believe AT&T, as a national wireless and
pay-TV provider, is subject to greater scrutiny than Comcast, which
doesn't have national reach as a cable TV and broadband provider,
the person said.
Comcast officials have already talked to Justice Department
officials about their potential pursuit of Fox as part of
discussions with regulators about the Disney-Fox deal, which is
undergoing review, a person close to Comcast said. The cable giant
has already "revved everything up" to submit information to
regulators on an "expeditious basis," the person said.
On the company's earnings call earlier this month, Lachlan
Murdoch, the executive co-chairman of 21st Century Fox, declined to
comment on what he called speculation about Comcast. "We are
committed to our agreement with Disney and are working through the
conditions to bring it to closing," Mr. Murdoch said. "In addition,
our directors, though, of course are aware of their fiduciary
duties on behalf of all shareholders."
21st Century Fox and Wall Street Journal-parent News Corp share
common ownership.
The assets Comcast and Disney are seeking to purchase include
the Twentieth Century Fox TV and film studio; cable networks;
international properties, including Star India and its stake in
U.K. pay-TV company Sky PLC; and Fox's stake in streaming service
Hulu.
As it makes its case to Fox shareholders and U.S. regulators,
Comcast is likely to highlight that about 70% of revenue from the
Fox assets it is pursuing would come from international operations,
assuming the cable giant acquires all of Sky, the people close to
Comcast said. Expanding overseas is a strategic imperative for
Comcast, which currently only derives 9% of its total revenue from
international operations, the people said.
Comcast has already been causing trouble for Disney and Fox,
setting off an international takeover battle by offering to buy Sky
for about $30 billion earlier this year. Fox had proposed an
acquisition of the rest of Sky in December 2016, and the deal has
faced an extensive regulatory review in the U.K.
On Monday, the U.K.'s culture secretary indicated Britain was
unlikely to open an antitrust review into Comcast's bid for Sky,
removing a potential hurdle for Comcast. Sky's independent
directors have said they would consider competing offers from Fox
and Comcast.
Shares of 21st Century Fox rose 0.7% on Wednesday. Comcast
shares fell 2.1%, while shares of Disney declined 1.9%.
--Keach Hagey and Joe Flint contributed to this article.
Write to Shalini Ramachandran at shalini.ramachandran@wsj.com
and Austen Hufford at austen.hufford@wsj.com
(END) Dow Jones Newswires
May 23, 2018 12:14 ET (16:14 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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