By Shalini Ramachandran
At one point last fall, Comcast Corp. Chief Executive Brian
Roberts and other top executives at the cable giant thought they
were near the deal of a lifetime to buy Rupert Murdoch's
entertainment assets.
Then everything went quiet. Mr. Murdoch's 21st Century Fox
postponed phone calls and didn't share promised data on its
business, people familiar with the talks said. There were days of
silence when Comcast expected heavy negotiations.
Weeks later, Mr. Murdoch announced a deal with rival Walt Disney
Co. for $52.4 billion, nearly $12 billion less than the Comcast
offer.
Mr. Roberts took the outcome personally. "I don't know what more
I could do," he told a close friend. After the holidays, he began
gaming out strategies that could torpedo Disney's Fox deal, people
close to the company said, setting into motion media's
highest-stakes bidding war in years and the biggest bet of his
career.
Comcast lobbed in an unsolicited, $65 billion all-cash offer for
the Fox assets last week, and Disney responded Wednesday, raising
its offer to about $71.3 billion in cash and stock through a
reworked deal with Fox, putting the ball back in Comcast's
court.
Throughout this drama, Comcast appears to have been on the
outside looking in. One big reason is Mr. Roberts's strained
relationships with the other executives at the table: 21st Century
Fox Executive Chairman Mr. Murdoch, who is selling prime pieces of
the empire he created over six decades, and Disney Chief Executive
Robert Iger, a onetime TV weatherman who has built one of America's
most valuable media conglomerates.
"Rupert loves Bob Iger, though their politics are completely
different," a person close to him said. "He doesn't want Brian
Roberts."
Comcast has a reputation as the industry boogeyman thanks to the
cable company's hard-nosed negotiations over rates it pays content
companies to carry their TV channels. Mr. Murdoch and his sons
believe Comcast and Mr. Roberts didn't always deal in good faith,
people close to the Murdochs say.
For the Murdochs, a stinging episode came three years ago when
Comcast dropped Fox's YES Network, home of the New York Yankees.
The Murdochs believed Comcast reneged on a handshake deal, people
familiar with the situation say. Comcast executives disagree that
there was ever a done deal.
Meanwhile, Messrs. Iger and Roberts have at times been friendly,
sharing a love for sailing and exchanging pictures of their boats,
according to a person familiar with the relationship. But Mr.
Roberts's continuing pursuit of Fox assets has upset Mr. Iger and
churned up old feelings of resentment stemming from Comcast's 2004
hostile attempt to buy Disney, while Mr. Iger was president,
according to people who know both men.
"Generally speaking, they bang into each other," said cable
pioneer and media magnate John Malone, who knows all three men.
"There is respect but there is also rivalry."
This account of the shifting battle for control of the 21st
Century Fox assets is based on interviews with more than two dozen
people close to the negotiations and familiar with the players
involved.
The winner of the Fox assets will have a head start in the race
to build an entertainment behemoth and respond to how the industry
has been ravaged by consumers cutting the cable TV cord. The goal
is to build the content, international scale and customer
relationships to mount a challenge to tech giants such as Netflix
Inc., Alphabet Inc.'s Google and Facebook Inc.
The assets for sale include the Twentieth Century Fox studio, a
stake in streaming service Hulu, U.S. cable networks and
fast-growing international businesses. Fox News and the Fox
broadcast network aren't part of the deal and will be spun off into
a new company. 21st Century Fox and Wall Street Journal parent News
Corp share common ownership.
For Mr. Roberts, a cable industry scion who was punching coupon
books for Comcast at age 8, the pursuit of Fox is a chance to
cement his legacy as one of the great deal makers of media and
position Comcast for the future.
Comcast has tried to drive a wedge between Messrs. Iger and
Murdoch. In a meeting last November over wine at Mr. Murdoch's
Bel-Air, Calif., estate, Mr. Roberts and NBCUniversal Chief
Executive Steve Burke said they believed Mr. Iger had been
exploring a presidential run and noted he had sidelined potential
successors over the years, while Comcast had a proven management
team, people familiar with the meeting say.
Mr. Roberts also told Mr. Murdoch that his son James Murdoch,
Fox's chief executive, should be wary of any promises of a job from
Mr. Iger, the people familiar with the interaction said. Mr. Iger
gave the Murdochs the impression that James could be in line for a
senior role at Disney, other people familiar with the talks said.
In May, The Wall Street Journal reported that the younger Mr.
Murdoch won't move to Disney if a deal between the companies is
reached, and will strike out on his own.
Other people close to Rupert Murdoch said he had other reasons
to be skeptical about a Comcast bid, such as possible regulatory
risks. They said he is also unemotional about the auction process
and will take the highest bidder.
The Murdochs showed a keen interest in Disney from the start.
When Disney made its first approach early in the fall, they held a
family conference call in which they decided to sell most of the
company. Earlier, when Verizon Communications Inc. had made an
approach, there was no such meeting or signoff, a person familiar
with the family's deliberations said.
Lachlan Murdoch, James's older brother and Fox's executive
co-chairman, initially resisted selling but eventually came around
to the idea and was relatively more open to Comcast than others in
the family, the person said. He felt Disney's offer was too low.
Lachlan Murdoch met Mr. Roberts in Los Angeles and was impressed,
though he shared some of his father's concerns, the person
said.
At the November meeting with Mr. Murdoch in Bel-Air, Mr. Roberts
and NBCUniversal's Mr. Burke said Comcast's stock has outperformed
Disney's, NBC was beating Disney's ABC in ratings and Universal's
theme parks were growing faster than Disney's much-bigger parks.
Mr. Murdoch said he was impressed, leaving Messrs. Roberts and
Burke with a good feeling, people familiar with the meeting
said.
Comcast put a $64 billion all-stock offer on the table, in line
with what its executives believe was Mr. Murdoch's asking price,
people familiar with the talks said. They felt they were closing in
on the deal.
In the background, Fox was busy negotiating with Disney after
initial talks had fallen apart. On Dec. 7, Mr. Murdoch called Mr.
Roberts and said Fox was going in a different direction, according
to Fox securities filing.
Fox said in the filing it rejected the higher Comcast offer
because of the regulatory risks. The Murdochs and the Fox board
were worried that the Justice Department's lawsuit to block
AT&T Inc.'s acquisition of Time Warner Inc. indicated the
government would oppose a Comcast-Fox tie-up.
The board was concerned Comcast didn't offer a breakup fee in
case the deal ran into regulatory hurdles, according to the filing.
People in the Comcast camp felt Fox's filing made it appear as if
Comcast refused to offer a breakup fee when in fact Mr. Roberts
showed openness to it during negotiations, people familiar with the
matter said. Senior Fox executives say its filing, which says Fox
asked Comcast multiple times for a breakup fee, is accurate.
Mr. Murdoch also considered that Disney's stock has no
controlling shareholder, while the Roberts family controls a
one-third voting stake in Comcast, so the Murdochs would be a
relatively small voice after a Comcast deal, people familiar with
Fox's deliberations say.
To Mr. Roberts, the fact Mr. Murdoch would rather take Disney's
stock over his -- with such a larger gap in their offer amounts --
was an insult. Comcast felt it wasn't taken seriously by Fox,
people familiar with the talks said.
A dejected Mr. Roberts told his deal team to take a breather for
the holidays. In January, he told them: We're not giving up,
according to people who attended.
Comcast viewed European pay-TV operator Sky PLC as a potential
side door into the Fox deal because it was already in play. Fox,
which owns 39% of Sky, had run into regulatory hurdles in its
effort to buy the rest. After hunkering down in a war room in
London, Mr. Roberts surprised Disney and Fox in February with a $31
billion informal offer for Sky.
Comcast's 50-person deal team began working full-throttle on a
possible larger move for the Fox assets Disney was buying. At one
point, Comcast signaled to Disney it would be willing to split the
spoils, where Comcast would take international assets including
Star India and Sky, and Disney would take domestic assets, people
familiar with the matter said. Disney didn't engage and has since
ruled out that possibility.
Comcast also entertained discussions with Amazon.com Inc. to see
whether carving up the Fox assets could offer a smoother regulatory
path, these people said.
A month ago, Mr. Roberts's Chief Financial Officer Michael
Cavanagh came up with a plan to offer all cash, something Disney
might struggle to match -- cable investors have more tolerance for
big debt loads. "That's when we realized, 'here's a path to win,' "
a person close to Comcast said.
On June 12, Comcast executives were glued to their TVs and
Twitter, awaiting the judge's decision on the AT&T case. When
the court ruled unequivocally against the Justice Department, "we
looked at it and said, this is the absolute best outcome," a person
there said.
The question now is how far Comcast will go to match Disney. The
pursuit has already weighed on its stock, which has lost more than
$32 billion in value since the Sky proposal.
Fox has indefinitely postponed the shareholder meeting for the
Disney-Fox deal, which had been set for July 10.
Mr. Roberts and Mr. Murdoch have tangled with each other for
decades, including over Mr. Murdoch's satellite provider BSkyB and
Hulu, a streaming service co-owned by Comcast, Fox, Disney and
AT&T.
At the annual media gathering in Sun Valley, Idaho, in 2013,
assurances from Mr. Roberts helped influence his co-owners to take
Hulu off the sale block. Two top bidders were Comcast rivals,
DirecTV and AT&T. Mr. Roberts told Mr. Iger and Fox's
then-Chief Operating Officer Chase Carey he would help Hulu become
the streaming platform for the cable-TV industry, people familiar
with the discussions said. Fox and Disney felt Comcast never
followed through, the people said. Comcast executives believe the
cable giant made a good-faith effort but the content rights tangled
the complicated talks.
In 2015, the Murdochs thought they had a deal with Comcast on a
higher rate the cable giant would pay to carry the YES Network. The
two sides agreed to extensions over the summer -- a sign of good
faith from Fox, since it would have less leverage after the
baseball season.
At the end of the Yankees season, Comcast informed Fox
executives it was going to drop YES Network because of low
viewership relative to its price. People close to Comcast said its
earlier agreement on a higher rate was tied to its proposed
acquisition of Time Warner Cable, which had fallen apart amid
regulatory opposition.
James Murdoch made a last-ditch effort to save the deal in a
phone call with Mr. Roberts, who told him that it was the cable
division's decision and he wouldn't interfere with it, people
familiar with the call say. The blackout lasted more than a year.
Only after the elder Mr. Murdoch got involved and tied YES's
renewal with that of powerhouse Fox News that Fox was able to
secure YES's position in January 2017.
"That did some serious reputational damage in Rupert's mind,"
one executive close to Fox said, referring to Mr. Murdoch's view of
Comcast. Rupert "doesn't forget things like that," the executive
said.
Since it acquired NBCUniversal in 2011, Comcast hasn't been shy
about its intention to copy the Disney playbook, investing in
family animation, theme parks and consumer-products businesses. At
a meeting with executives after acquiring DreamWorks Animation SKG
Inc. in 2016, Mr. Roberts said he had "Disney envy," according to a
person who was present.
Messrs. Roberts and Mr. Iger have taken vastly different
approaches to building up their companies. Mr. Roberts has done a
series of mammoth deals, including a $47.5 billion deal to buy
AT&T Broadband in 2001 and the $39.4 billion acquisition of
NBCUniversal. He hasn't shied away from competitive bidding
situations, even if it means muddying relationships with friends
and mentors.
During his tenure as CEO, Mr. Iger has gone for relatively
smaller content targets including Pixar Animation Studios, Marvel
Entertainment and Lucasfilm. Those three acquisitions added up to
less than $16 billion, a fraction of the proposed Fox deal.
Over the course of several meetings, the elder Mr. Murdoch was
sold on Mr. Iger's vision.
--Ben Fritz and Cara Lombardo contributed to this article.
Write to Shalini Ramachandran at
shalini.ramachandran@wsj.com
(END) Dow Jones Newswires
June 21, 2018 17:53 ET (21:53 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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