T AT&T Inc

By Ben Dummett 

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 (June 29, 2018).

Activist investor Chris Hohn opposed 21st Century Fox Inc.'s arguments suggesting a takeover bid from Comcast Corp. would face greater regulatory risk than Disney's offer, as he pushes for a bidding war over Rupert Murdoch's entertainment empire to continue.

Mr. Hohn, who heads TCI Fund Management Ltd. and is one of Fox's largest shareholders with a 7.4% stake, laid out his arguments in a letter Thursday addressed to Mr. Murdoch. The London-based hedge-fund manager cites AT&T Inc.'s recent antitrust court win to complete its blockbuster acquisition of Time Warner Inc. and the U.S. Justice Department approval of Disney's proposed $71 billion acquisition for much of Fox as reasons to believe a Comcast bid could ultimately win regulatory approval.

A Fox spokesman declined to comment on Mr. Hohn's letter.

In the battle for customers, Comcast and Disney each covet many of Fox's key media assets including Twentieth Century Fox's film and TV studio; U.S. cable network FX; international assets such as U.K. pay-TV provider Sky PLC and Star India; and Fox's one-third stake in the streaming service Hulu.

Fox News and the Fox broadcast network aren't for sale and will be spun out into a separate company with other assets. 21st Century Fox and The Wall Street Journal's parent company News Corp. share common ownership.

The takeover battle escalated earlier this month when Disney raised its original bid for the Fox assets by about 36% to $71.3 billion in cash and stock to top Comcast's unsolicited all-cash offer of about $65 billion.

Fox argues that Comcast would face greater regulatory hurdles than the Disney bid. Comcast believes that the U.S. court approval of a vertical merger of a distributor and a content provider by allowing AT&T to acquire Time Warner should appease Fox's regulatory concerns.

Mr. Hohn's letter comes a day after the U.S. Justice Department's approval of Disney's latest bid on the condition that Disney divest Fox's regional sports networks. That decision gives the movie-studio operator a potential advantage over Comcast as it allows Disney to still retain Fox's movie and television studio as well as the Hulu stake, all of which are key to its long-term strategy.

As a Fox shareholder, any reason for Comcast to drop its pursuit of the Fox assets ultimately cuts into Mr. Hohn's potential gain from his investment.

"We do not know if Comcast will return with a higher offer, but we will be strongly motivated by the deal that offers the highest price and we will encourage other shareholders to do the same," Mr. Hohn wrote in his letter.

Instead of potentially discouraging Comcast from bidding, the Justice Department's approval of Disney's bid offers Comcast a "template" to reach a similar settlement with the department as part of its own acquisition of the Fox assets, Mr. Hohn said. He also noted that Fox is substantially an international or non-U.S. business, which lies outside the jurisdiction of the U.S. government.

Strong precedents and "the largely international nature of the assets being sold by Fox and Comcast's willingness to match structural remedies, means that the overall anti-trust risk is low," Mr. Hohn said.

That view is shared by some analysts. "If Comcast makes the highest bid...shareholders should dig deeper into what theories of harm against Comcast are still viable," analysts at New Street Research said.

--Keach Hagey contributed to this article.

Write to Ben Dummett at ben.dummett@wsj.com

(END) Dow Jones Newswires

June 29, 2018 02:47 ET (06:47 GMT)

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