By Shalini Ramachandran
Comcast Corp. dropped its pursuit of 21st Century Fox Inc.'s
entertainment assets, clearing the way for rival Walt Disney Co. to
acquire key pieces of Rupert Murdoch's media empire after the two
sides dueled in recent weeks.
Comcast, though, said Thursday that it was still pursuing
European pay-TV giant Sky PLC. Fox already owns 39% of Sky and is
vying to consolidate ownership.
Comcast said it wouldn't submit a new offer for Fox's
entertainment assets after its earlier $65 billion all-cash offer
was topped by Disney, which bid $71.3 billion in cash and
stock.
Shares of Comcast rose 3.3% in morning trading, while 21st
Century Fox shares fell 1.8%. Disney shares rose 2.1%.
The cable giant's withdrawal ends a high-stakes chess match
among some of media's most powerful players, as they position
themselves for the decline of the U.S. pay TV industry and try to
stock up on assets that could help them compete against streaming
services like Netflix Inc.
Assuming Disney wins all necessary approvals -- it already
secured clearance from the U.S. Justice Department -- it will wind
up with assets including the Twentieth Century Fox film and TV
studio, a controlling stake in streaming-video service Hulu, and
international properties including Star India.
Last week, Comcast raised its offer for Sky to GBP14.75 a share,
valuing the company at $34 billion. That is a 5% premium to an
offer Fox announced earlier and 18% above Comcast's first bid.
Comcast said its latest offer was recommended by Sky's independent
directors.
Sky shares fell 1.9% to GBP15.02 a share in London trading.
Disney Chief Executive Robert Iger has called Sky a crown jewel
of his $71 billion pursuit of 21st Century Fox but will now have to
decide how hard to fight for it, as some on Wall Street are arguing
that the European television company isn't key to Disney's
future.
The saga became a test of wills for the chief executives, a test
of patience for shareholders as the bidding ratcheted up, and a
forum to debate regulatory crosscurrents in media as a round of
mergers challenge long-held antitrust theories.
"I'd like to congratulate Bob Iger and the team at Disney and
commend the Murdoch family and Fox for creating such a desirable
and respected company," Comcast Chief Executive Brian Roberts said
Thursday in prepared remarks.
Comcast had been pursuing the Fox assets since last fall. Fox
struck a deal with Disney in December despite its substantially
lower offer price, citing concerns about whether a tie-up with
Comcast could pass muster in Washington.
Comcast felt its efforts weren't taken seriously, people close
to the company said. After months of plotting and planning, it
eventually made another run at Fox with an unsolicited bid that was
about 24% higher than Disney's original offer.
When Disney came back with its latest offer, Comcast reviewed
its options. The cable company considered raising money from
private-equity investors or strategic suitors to finance a higher
bid, people close to the company said. Comcast's pursuit also hit a
setback after the Justice Department said last week that it would
appeal a federal judge's decision to bless a merger of AT&T
Inc. and Time Warner Inc. Comcast had used the earlier ruling to
rebut concerns from Fox that its bid would face regulatory
risk.
In the end, Comcast chose to pull the plug on its takeover
effort.
Comcast's primary interest in the Fox assets was its
international properties, since Comcast generates only a fraction
of its revenue from markets outside the U.S., where the pay TV
business is mature and under increasing stress from
cord-cutting.
One person close to Comcast said recently that if the company
didn't wind up with the Fox assets, it would look at other paths
for growth, including acquisitions in other areas of media or
technology.
The outcome amounts to a major victory for Mr. Iger, who has
gambled big on the Fox assets as he tries to steer the
entertainment giant into a new era. Mr. Iger and Mr. Roberts have
had a rivalry dating back to 2004, when Comcast unsuccessfully made
a hostile acquisition run at Disney.
All the previous acquisitions during Mr. Iger's tenure were
substantially smaller than Fox, including Pixar Animation Studios,
Marvel Entertainment and Lucasfilm. Comcast's hostile bid for Fox
and financial firepower forced Mr. Iger to up the ante.
Disney's cable TV business has been buffeted by cord-cutting,
especially sports network ESPN, which has long been a reliable
profit engine but has lost millions of subscribers as people
disconnect cable service or switch to slimmed-down packages.
Disney believes it can wring more value out of Fox's movie and
TV franchises such as "Avatar" and "The Simpsons," and hopes Fox's
collections of assets will help it launch direct-to-consumer
subscription services that can compete against Netflix, which has
rapidly become a juggernaut.
For Mr. Murdoch, Fox's executive chairman, sealing a deal with
Disney will mean parting with a huge portion of the media empire
he's assembled over six decades. The Murdoch family, which has a
39% voting stake and 17% economic interest in Fox, has benefited
from the bidding war, along with other Fox shareholders. The
Murdoch family also have significant holdings in Wall Street
Journal parent News Corp.
Mr. Murdoch isn't selling everything. Fox News and Fox broadcast
network are among the assets that are being spun off into a new
news and sports-focused company the Murdoch family will continue to
control.
--Austen Hufford contributed to this article.
Write to Shalini Ramachandran at
shalini.ramachandran@wsj.com
(END) Dow Jones Newswires
July 19, 2018 10:10 ET (14:10 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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