Fox Rejected Higher Comcast Bid Due to Antitrust Concerns -- Update
April 18 2018 - 8:12PM
Dow Jones News
By Shalini Ramachandran and Ben Fritz
21st Century Fox Inc. rejected an acquisition offer for its
entertainment assets from cable giant Comcast Corp. largely over
antitrust concerns, according to a regulatory filing, 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 ultimately 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 divesting 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 worth $34.41 per share as of
November. A person familiar with the matter confirmed that Party B
is Comcast.
Verizon 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 filing said the Disney deal valued Hulu at $8.73
billion.
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 in a global chess
match as media companies seek to expand their holdings globally in
a consolidating industry and better compete against tech giants
like Netflix.
Across the Atlantic, 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
hasn't yet to formalized its bid.
The cable giant has been waiting for regulatory and strategic
reasons and because it is keeping 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
discussions 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 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 encourage 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. Among other
things, it said it would agree to any proposed behavioral remedies
offered to regulators in another big media merger -- AT&T
Inc.'s deal to buy 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 were 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 weighing 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.
Write to Shalini Ramachandran at shalini.ramachandran@wsj.com
and Ben Fritz at ben.fritz@wsj.com
(END) Dow Jones Newswires
April 18, 2018 19:57 ET (23:57 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
Walt Disney (NYSE:DIS)
Historical Stock Chart
From Mar 2024 to Apr 2024
Walt Disney (NYSE:DIS)
Historical Stock Chart
From Apr 2023 to Apr 2024