Cable giant Comcast Corp. CMCSA -1.94% said
it is in advanced stages of preparing a higher, all-cash offer for the assets
of 21st Century Fox that Walt Disney Co. DIS -1.13% has
agreed to buy, an effort it made public Wednesday to convince Fox shareholders
of its seriousness.
Earlier this month, The Wall
Street Journal and others reported that
Comcast was considering making a play to break up that $52.4
billion all-stock Disney deal and had lined up around $60 billion in financing
for an all-cash offer.
Comcast said Wednesday that
while no final decision has been made, the work to finance the offer is well
advanced. The company also is preparing to begin talks with Fox shareholders as
soon as this week, a person close to Comcast said.
Comcast has been
contemplating a renewed pursuit of Fox’s assets since the deal with Disney was
announced in December at a lower price than Comcast had offered. For both
Comcast and Disney, the pursuit of Fox is a gambit to better compete against
Netflix Inc. and other global tech giants as the American pay-TV landscape
comes under pressure.
One factor in whether
Comcast proceeds with a renewed offer for Fox is the outcome of the government’s
lawsuit to block the merger ofAT&T Inc. and Time Warner Inc., the Journal
has previously reported.
Comcast made the
announcement Wednesday about its preparations because its executives were
worried that Fox and Disney might rush a shareholder vote before the decision
on the AT&T-Time Warner deal came down, according to people close to
Comcast. A decision in the AT&T case is expected by June 12.The dates for
the Disney and Fox meetings haven’t yet been announced.
The cable giant wanted to
send a message to Fox shareholders that it is serious about an all-cash offer
and about allaying the Fox board’s
concerns about an earlier Comcast offer, one of the people said.
In an April filing, Fox said
it received a bid from a rival of Disney that people familiar with the matter
identified as Comcast. That bid was 16% higher than Disney’s on a per-share
basis, but Fox rejected it based on regulatory risk, concerned such a deal
would require the divestiture of too many valuable assets, according to the
filing.
Comcast tried to calm those
concerns in Wednesday’s statement, saying that the structure and terms of any
offer, including the regulatory risk provisions and termination fee, “would be
at least as favorable to Fox shareholders as the Disney offer.” Paying a
termination fee would be a change from Comcast’s earlier stance. In
negotiations with Fox last year, Comcast Chief Executive Brian Roberts wouldn’t
agree to pay a breakup fee—a key point of contention that helped derail the
talks, the filing and people familiar with the situation said.
The cable giant is still
likely to wait until a judge rules on the AT&T deal before making a formal
offer, since the government’s fight against AT&T was a key concern for
Fox’s board, people close to Comcast said.
Comcast executives
believe the antitrust
trial went favorably for AT&T.
Even if the ruling is
unfavorable for AT&T, Comcast may proceed with its Fox pursuit, one of the
people said. The cable giant’s executives believe AT&T, as a national
wireless and pay-TV provider, is subject to greater scrutiny than Comcast,
which doesn’t have national reach as a cable TV and broadband provider, the
person said.
Comcast officials have
already talked to Justice Department officials about their potential pursuit of
Fox as part of discussions with regulators about the Disney-Fox deal, which is
undergoing review, a person close to Comcast said. The cable giant has already
“revved everything up” to submit information to regulators on an “expeditious
basis,” the person said.
On the company’s earnings call
earlier this month, Lachlan Murdoch, the executive co-chairman of 21st Century
Fox, declined to comment on what he called speculation about Comcast. “We are
committed to our agreement with Disney and are working through the conditions
to bring it to closing,” Mr. Murdoch said. “In addition, our directors, though,
of course are aware of their fiduciary duties on behalf of all shareholders.”
The cable industry is
undergoing a major transformation, as more Americans cut the cord on their
cable subscriptions and flock to streaming services like Hulu and Netflix. So
how did we get here? Illustration: Shaumbe Wright/WSJ
21st Century Fox and Wall
Street Journal-parent News Corp share common ownership.
The assets Comcast and
Disney are seeking to purchase include the Twentieth Century Fox TV and film
studio; cable networks; international properties, including Star India and its
stake in U.K. pay-TV company Sky PLC;
and Fox’s stake in streaming service Hulu.
As it makes its case to Fox
shareholders and U.S. regulators, Comcast is likely to highlight that about 70%
of revenue from the Fox assets it is pursuing would come from international
operations, assuming the cable giant acquires all of Sky, the people close to
Comcast said. Expanding overseas is a strategic imperative for Comcast, which
currently only derives 9% of its total revenue from international operations,
the people said.
Comcast has already been
causing trouble for Disney and Fox, setting off an international takeover
battle by offering to buy Sky for about $30 billion earlier this year. Fox had
proposed an acquisition of the rest of Sky in December 2016, and the deal has
faced an extensive regulatory review in the U.K.
On Monday, the U.K.’s
culture secretary indicated Britain was
unlikely to open an antitrust review into Comcast’s bid for
Sky, removing a potential hurdle for Comcast. Sky’s independent directors have
said they would consider competing offers from Fox and Comcast.
Shares of 21st Century Fox
rose 0.7% on Wednesday. Comcast shares fell 2.1%, while shares of Disney
declined 1.9%.
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