DIS Walt Disney Co

By Keach Hagey 

and Walt Disney Co. announced a new merger agreement Wednesday, increasing the value of the deal and adding a cash component.

Disney has agreed to buy certain parts of Fox for $38 a share, above its previous agreement in December for $28 a share. Under the new pact, Fox shareholders will be able to receive their consideration, in the form of cash or stock, subject to 50/50 proration.

Fox, in a statement, said the new Disney deal "is superior to the proposal" made by the Comcast Corp. earlier this month.

Disney originally agreed in December to purchase the Fox assets for $52.4 billion in stock

The assets in play include the Twentieth Century Fox film and TV studio; U.S. cable networks including FX and regional sports channels; international assets including Sky PLC and Star India; and Fox's one-third stake in the streaming service Hulu.

Neither proposed deal includes Fox News, Fox Sports 1, the Fox broadcast network or its television stations. In either scenario, those assets would be spun off into a new company, for the moment, dubbed "New Fox."

Before it struck a deal with Disney, Fox rejected an offer from Comcast that was 16% higher on a per-share basis. Comcast then revived its pursuit this year.

Fox's board and shareholders will have to weigh a number of factors as they consider which suitor is best. The total price, or equity value, of the offer is one major consideration, of course.

But the structure of the offer also matters. Some Fox shareholders might prefer a premium cash offer like the one Comcast is offering, even though the capital gains would be taxable.

A stock deal has some appeal. Disney's current, all-stock deal with Fox would allow both the spinoff of New Fox and the merger with Disney to be tax-free to Fox shareholders, according to independent tax analyst Robert Willens. That structure has benefits for Rupert Murdoch and his family, who have a 17% economic interest in 21st Century Fox and have held Fox stock for decades, meaning they will reap substantial gains.

Other shareholders, particularly the large institutional shareholders that are Fox's biggest investors, tend to care much less about taxes, Mr. Willens added.

People close to Fox have said that the Murdochs are looking for the best financial deal and are working in the best interests of all shareholders. 21st Century Fox and Wall Street Journal parent News Corp share common ownership.

If Fox leans toward a cash-heavy deal, Disney is in position to inject cash into its offer, people familiar with the matter say.

In addition to its tax benefits, Disney's stock deal has the potential long-term benefit of giving Fox investors the upside of any rise in Disney's stock, which analysts expect to be substantial. However, such an outcome is also, by definition, uncertain.

Regulatory hurdles are also a consideration. The Justice Department would have to sign off on either deal, and Fox cited regulatory concerns among its reasons for rebuffing Comcast's initial approach.

However, last week, a judge struck down the Justice Department's attempt to block AT&T's acquisition of Time Warner Inc. Comcast believes the court's approval of a "vertical" merger between a distributor and a content company should nullify Fox's regulatory concerns, since a Comcast-Fox tie-up would have similar characteristics, people close to the cable giant say.

Write to Keach Hagey at keach.hagey@wsj.com

(END) Dow Jones Newswires

June 20, 2018 08:30 ET (12:30 GMT)

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