Fox, Disney Reach Sweetened Merger Agreement -- 2nd Update
June 20 2018 - 09:24AM
Dow Jones News
By Keach Hagey
21st Century Fox agreed to a sweetened merger agreement with
Walt Disney Co. that adds a cash component and eclipses a rival
offer from Comcast Corp.
Under the new deal, Disney agreed to acquire Fox's entertainment
assets for more than $70 billion, compared with the original deal
price of $52.4 billion in stock and Comcast's roughly $65 billion
all-cash bid.
Fox shareholders could choose to take the new Disney offer in
cash or stock, subject to a 50% stock, 50% cash proration.
Fox, in a statement, said the new Disney deal "is superior to
the proposal" made by the Comcast Corp. earlier this month.
In premarket trading, shares of Fox rose 7% to $47.85, Disney
shares increased 1% to $107.20, and Comcast shares rose 1.3% to
$33.23.
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.
On a per-share basis, the new deal values the Fox assets at $38
a share, compared with the original Disney deal of $28 a share and
Comcast's offer of $35 a share.
Fox's board and shareholders have had 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. More stock in the
deal has tax advantages for shareholders. These advantages might be
particularly large for Fox shareholders, such as the Murdoch
family, who have held Fox's stock for a long time and thus face a
potentially large capital gain to pay taxes on if it is sold for
cash. Rupert Murdoch and his family have a 17% economic interest in
21st Century Fox. 21st Century Fox and Wall Street Journal-parent
News Corp share common ownership.
Disney said the stock part of the deal is expected to be
tax-free to 21st Century Fox shareholders.
Other shareholders, particularly the large institutional
shareholders that are Fox's biggest investors, may care less about
taxes.
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.
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.
In a statement, Disney said it believes its sweetened bid for
Fox has a "clear and timely path to regulatory approval," adding
that the companies were working toward "meeting all conditions
necessary for closing."
Write to Keach Hagey at keach.hagey@wsj.com
(END) Dow Jones Newswires
June 20, 2018 09:09 ET (13:09 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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