DIS Walt Disney Co

By Shalini Ramachandran and Erich Schwartzel 

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 (June 14, 2018).

Comcast Corp. made an unsolicited offer to buy most of 21st Century Fox Inc. for roughly $65 billion, kicking off a bidding war with Walt Disney Co. as the two media titans jockey for position in a business undergoing tumultuous change.

Comcast on Wednesday bid $35 a share in cash for the assets, which range from a storied Hollywood studio and international pay-TV distribution to cable networks and a stake in streaming company Hulu. That is a premium of nearly 20% to Disney's all-stock offer for the same set of assets.

Neither bid includes Fox News, Fox Sports 1 or the Fox broadcast network and its TV stations, which will be spun off into a new company.

Fox confirmed it received Comcast's offer and said it would "carefully review and consider" the proposal. Disney had no immediate comment on the offer.

Disney is lining up financing in the event it chooses to counter Comcast's offer with new terms that include cash, according to a person familiar with the matter.

The Comcast offer follows a federal court ruling Tuesday that approved AT&T Inc.'s acquisition of Time Warner Inc., a decision that appeared to allay antitrust concerns regarding a Comcast bid for Fox. Fox's board last year rejected an earlier Comcast bid in favor of a deal with Disney, fearing regulators might block such a deal or require the sale of valuable assets.

The AT&T ruling emboldened Comcast to relaunch its bid for Fox with an offer that isn't much higher than what it had earlier proposed. Comcast had offered an all-stock deal valued at $34.41 a share as of November, according to a Fox regulatory filing in April and a person familiar with the matter at the time.

Disney's deal, reached in December, valued the Fox assets at $29.54 a share based on the last trading day before it was announced. The bid is now worth $29.18 as of Wednesday's close.

In a letter to 21st Century Fox Executive Chairman Rupert Murdoch and his sons disclosed with the new bid, Comcast Chief Executive Brian Roberts said a deal with Comcast "is as or more likely to receive regulatory approval than the Disney transaction." He added that an antitrust review of a Comcast acquisition shouldn't take much longer than the Disney review.

"We firmly believe that the truly great media companies of the next century will be integrated global entities," Mr. Roberts said on a call with investors Wednesday afternoon.

Whether Comcast succeeds in winning over Fox will turn largely on whether Fox officials agree with Mr. Roberts.

People close to Disney say Comcast may continue to have regulatory issues, given it is the largest high-speed broadband provider in the U.S. and could, as the owner of the Fox assets, have the incentive to make life difficult for rival content companies or streaming providers that depend on its pathway into customers' homes. Comcast's broadband concentration caused regulators to throw up roadblocks to its ill-fated attempt to buy Time Warner Cable in 2015.

It is now up to Fox to determine whether it wants to present the proposed Comcast deal to its shareholders. If it does, Disney has the right to counter with a new offer.

Fox has set a July 10 meeting for shareholders to vote on the sale to Disney, but that meeting could be postponed. Should there be a new round of bidding, the back-and-forth could stretch on for weeks, if not months, people close to the process say.

The fight for Fox is part of a scramble by media, telecom and cable companies to get bigger as the superpowers of the technology industry, from Netflix Inc. to Facebook Inc., have disrupted old ways of doing business.

Increasingly, the old guard is focused on merging content with distribution and technology, betting that such combinations could help them aggregate valuable consumer data to appeal to advertisers and create streaming options for viewers rejecting the cable bundle. The deal between AT&T, the largest U.S. pay-television company and the No. 2 wireless carrier, and Time Warner, owner of HBO, CNN and the Warner Bros. studio, is a clear example of that.

The industry is moving toward "an end state maybe five years from now where three or four large, vertically integrated conglomerates with presence in wireline, wireless and content potentially compete with each other" and the Silicon Valley giants, Barclays analysts said Wednesday.

The battle for Fox includes some of media's biggest power brokers, pitting Mr. Roberts against Disney CEO Robert Iger for businesses long part of Mr. Murdoch's empire.

The Fox assets are seen as prized entertainment properties, and Mr. Murdoch's willingness to sell them came as a surprise to many in the media industry. (21st Century Fox and Wall Street Journal-parent News Corp share common ownership.)

The rare acquisition opportunity, combined with the need to significantly expand overseas and acquire new distribution and content, is adding a dimension of urgency for both Comcast and Disney.

Comcast is dealing with a declining pay-TV market at home. It could find new growth with Fox's international assets, including European and Indian streaming services.

For Disney, winning Fox would be a hedge against Silicon Valley companies like Netflix that have taken on Hollywood by marrying technology with piles of cash to spend on production. Immediately, it would give Disney majority ownership in Netflix competitor Hulu and access to a new, deep library of Fox's movies and shows, including franchises like "Avatar" and "The Simpsons," to make available on its planned streaming service.

Last week, Makan Delrahim, the Justice Department's antitrust chief, seemed to indicate that Disney's transaction didn't raise major concerns. "They had good advice and carved out surgically...a transaction that might be doable," he said on CNBC. Still, Disney's amassing of content and two powerful Hollywood studios under one roof could raise some concerns.

Both companies already have gamed out regulatory concessions they would be willing to make. Comcast and Disney are willing to divest Fox's array of regional sports networks in the U.S. if necessary. Comcast is willing to match any other assets Disney offers up as regulatory carrots and would be willing to divest Fox's Hulu stake if it became a flashpoint, people close to Comcast said.

Mr. Roberts and Mr. Iger's history together has at times been contentious. In 2004, while Mr. Iger was president of Disney, the media company spurned a hostile takeover attempt by Comcast. And after Disney struck its agreement with Fox, Mr. Roberts made an informal offer earlier this year for one of the Fox assets -- European pay-TV operator Sky PLC -- knowing it could muck up their deal.

Write to Shalini Ramachandran at shalini.ramachandran@wsj.com and Erich Schwartzel at erich.schwartzel@wsj.com

(END) Dow Jones Newswires

June 14, 2018 02:47 ET (06:47 GMT)

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