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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