DIS Walt Disney Co

By Keach Hagey and Erich Schwartzel 

Walt Disney Co. raised its offer to purchase most of 21st Century Fox to more than $70 billion in cash and stock, topping an unsolicited offer from rival Comcast Corp. as the bidding war for the coveted media properties escalates.

Disney's new offer is far higher than the price of its original deal, $52.4 billion in stock, and surpasses Comcast's all-cash offer of roughly $65 billion. Disney will pay Fox shareholders roughly 50% in cash and 50% in stock.

Fox, in a news release, said the new Disney deal "is superior to the proposal" made by Comcast earlier this month. Comcast officials were unavailable for comment.

In morning trading, Fox's class A shares rose 6.2% to $47.47, Disney shares increased 0.8% to $106.98, and Comcast shares added 0.7% to $33.03.

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."

Disney submitted its bid Wednesday ahead of a Fox board meeting in London, a person familiar with the situation said. Fox Executive Chairman Rupert Murdoch and Disney Chief Executive Bob Iger met to discuss the new pact.

A continuing bidding war could be a strain on both companies' balance sheets. Disney Chief Financial Officer Christine McCarthy said the company no longer expects to complete a $20 billion share repurchase announced with the initial deal in December.

Mr. Iger said on a conference call Wednesday that the possibility of meeting with Comcast to divide the Fox assets among the two companies is a nonstarter. "We have an agreement in place with [Fox] that precludes that," he said.

Disney also has time on its side, Mr. Iger said, because the company's deal with Fox has undergone several months of regulatory review and would presumably be approved sooner than if Comcast started the process today.

Mr. Iger highlighted how Fox's programming will boost his company's efforts to launch a Disney-branded streaming service next year and directly compete with Netflix Inc. "Direct-to-consumer distribution has become an even more compelling proposition in the six months since we announced the deal. The consumer is voting -- loudly," he said.

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.

Disney's offer puts a "collar" on the stock portion, saying Fox shareholders would receive Disney shares equal to the $38 price so long as Disney's stock price is between $93.53 and $114.32.

Fox said it has decided to postpone the special meeting of shareholders it had originally scheduled on July 10 to "a future date."

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.

Mr. Iger said Wednesday that Disney and Fox executives already have been working for six months to get their union blessed by regulatory authorities around the world, and signaled that he still believed a "vertical" merger of the kind Comcast proposed for the Fox assets faced regulatory headwinds.

"We believe that we have a much better opportunity, both in terms of approval and the timing of that approval, than Comcast does in this case, " he said.

--Austen Hufford, Dana Mattioli and Allison Prang contributed to this article.

Write to Keach Hagey at keach.hagey@wsj.com and Erich Schwartzel at erich.schwartzel@wsj.com

(END) Dow Jones Newswires

June 20, 2018 10:03 ET (14:03 GMT)

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