21 October 2020

Comcast Goes Public On Plan For Fox Bid

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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%.

Click here for the original article from The Wall Street Journal.
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