Fox Rejected Bid on Antitrust Fear -- WSJ
April 19 2018 - 3:02AM
Dow Jones News
By Shalini Ramachandran and Ben Fritz
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (April 19, 2018).
21st Century Fox Inc. rejected an acquisition offer for its
entertainment assets from cable giant Comcast Corp. largely over
antitrust concerns, a regulatory filing said, even though the bid
was 16% higher on a per-share basis than what Walt Disney Co.
ultimately agreed to pay.
After extended discussions, Fox's board decided that Comcast's
offer was too risky to accept, according to the filing. Fox was
concerned such a deal might not pass muster in Washington, and even
if it did, it would require divestiture of valuable assets that
would reduce the value of the deal to Fox. Comcast also didn't
offer Fox a breakup fee in the event regulators didn't bless the
deal, according to the filing.
Disney's all-stock deal with Fox, reached in December, valued
the Fox assets at $29.54 a share based on the last trading day
before it was announced. The filing said a company described as
"Party B" offered an all-stock deal valued at $34.41 per share as
of November. A person familiar with the matter confirmed that Party
B is Comcast.
Verizon Communications Inc. also showed interest in making an
all-stock bid for Fox assets, according to the filing, but Fox said
it would have been without "any meaningful premium" to Fox
shareholders. Verizon was described in the filing as Party A, the
person said.
Fox didn't set a date for a shareholder vote in the filing.
By laying out the back-and-forth with Comcast, Fox is spelling
out for shareholders why it rejected a higher-value offer. In its
$52.4 billion deal with Disney, Fox agreed to sell its television
and film studios; cable networks; international assets including
Star India and its stake in European operator Sky PLC; its stake in
streaming service Hulu; and its 22 regional sports networks. The
Disney deal valued Hulu at $8.73 billion, the filing said.
The Wall Street Journal reported in February that Comcast had
submitted a bid for Fox's assets that was more than 15% higher than
Disney's.
21st Century Fox and Wall Street Journal parent News Corp share
common ownership.
Details of Comcast's bid add to the intrigue as media companies
seek to expand their holdings globally in a consolidating industry
and better compete against tech giants such as Netflix Inc.
Fox and Comcast are tussling over control of European pay-TV
operator Sky. Fox, which owns 39% of Sky, has been seeking to take
full control but has faced a lengthy regulatory review. In
February, Comcast launched an informal $31 billion offer for all of
Sky that would top Fox's, but Comcast has yet to formalize its bid.
The cable company has been waiting to do so for regulatory and
strategic reasons, and because it is keeping its options open about
continuing to pursue Fox, people familiar with Comcast's thinking
said.
Earlier this month, Fox told U.K. regulators that Disney has
offered to buy Sky News to help Fox win regulatory approval.
21st Century Fox Executive Chairman Rupert Murdoch and Disney
Chief Executive Robert Iger first discussed the possibility of a
combination in early August 2017, while talking about media trends
during a meeting in Los Angeles, according to the filing. A first
round of talks stalled over price. When reports of the Disney-Fox
talks surfaced in November, Comcast Chief Executive Brian Roberts
jumped in, reaching out to Mr. Murdoch to propose a deal of his
own. Talks between Fox and Disney restarted soon after that.
Fox's lawyers advised that Comcast's track record with antitrust
authorities could mean a deal would run into significant hurdles in
Washington, according to the filing. Comcast sought to assuage
Fox's concerns by offering that any assets that raised red flags to
regulators, along with the corresponding tax burden, would be
allocated to New Fox, the company left behind after the sale. That
raised concerns for Fox executives and advisers, who felt that such
a plan could incentivize Comcast to agree to divestitures that
would ultimately narrow the scope of the deal and potentially
reduce the return for Fox shareholders.
As talks progressed, Comcast offered other carrots, including
that it would agree to any proposed behavioral remedies offered to
regulators by AT&T Inc. in its pursuit of Time Warner Inc., and
that it would bear 50% of some tax costs of potential divestitures.
It even offered to allow Fox a "unilateral termination right" if
the AT&T-Time Warner deal was enjoined in court. Mr. Roberts
made a last-ditch effort to save the deal in a New York City
meeting with Mr. Murdoch on Dec. 4, but continued to hold firm that
Comcast wouldn't agree to pay a breakup fee.
After considering the antitrust risks at a Dec. 6 board meeting,
Fox decided to cease talks with Comcast. A week later, Fox sealed
its deal with Disney.
Corrections & Amplifications Disney's all-stock deal with
Fox valued the Fox assets at $29.54 a share based on the last
trading day before it was announced. An earlier version of this
article incorrectly stated the deal valued the entire company at
$29.54 a share.
Write to Shalini Ramachandran at shalini.ramachandran@wsj.com
and Ben Fritz at ben.fritz@wsj.com
(END) Dow Jones Newswires
April 19, 2018 02:47 ET (06:47 GMT)
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