Comcast Scrambles for 21st Century Fox as Disney Gains Momentum – Variety

Comcast kept his mother on Wednesday after the Justice Department gave Disney a major boost in its quest to acquire most of 21st Century Fox.

The Justice Ministry on Wednesday gave the green light to the $ 71.3 billion Disney deal to buy back Rupert Murdoch's market share after Disney agreed to divest Fox's 22 regional sports networks as a precondition to obtaining antitrust clearance.

According to the 21st Century Fox Board of Directors, DOJ approval is important because Comcast's ability to obtain regulatory approval for its proposed $ 65 billion transaction was the paramount consideration for the Fox Board of Directors. After failing to close a deal with Fox last fall, Comcast on June 13 launched a $ 65 billion deal, exceeding the economic value of Disney's initial deal with Fox, unveiled on December 14th. and valued at $ 52.4 billion.

But Wednesday's Justice decision reinforces Disney's hand.

"The pressure is again on Comcast for a larger offer than Disney's $ 38 per share offering to help the 21st Century Fox Board of Directors reject regulatory approval," writes Wednesday Michael Nathanson, badyst at MoffettNathanson Research. Comcast declined to comment on this story.

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At a Securities and Exchange Commission filing late Monday, Disney and Fox offered behind-the-scenes details on high-level maneuvers to respond to Comcast's bid and on council's deliberations and consultations. Fox on the merits of competing offers. Disney has the upper hand in this process as it has the right to match any rival offer for Fox.

Fox's board members have repeatedly raised concerns about a Comcast deal getting bogged down in a long regulatory review and a fight over divestments or other conditions. From this point of view, the $ 71.3 billion cash and stock offer that Disney unveiled on June 20 looks even better in light of Wednesday's announcement by the Department of Justice. .

"21CF management noted that Disney's proposal (June 20), compared to Comcast, provided a higher face value, a better opportunity for appreciation of value by its equity component, the certainty of value by its collar mechanism, counterpart, as well as some improvements to the regulatory risk allocation of the existing merger agreement, "said the SEC filing.

"Comcast proposed a contractual regulatory risk allocation, which simply matched the regulatory efforts and reverse termination cost provisions of the original merger agreement and did not provide enhanced protections to counter the higher regulatory risk of A transaction with Comcast ". The board also decided that "a transaction with Comcast presented unique regulatory uncertainties and that the (Comcast's) proposal did not sufficiently limit the regulatory uncertainty badociated with a potential strategic transaction with 21CF."

The Fox Board of Directors raised concerns that Comcast's June 13 offer has only agreed to match the regulatory protections included in Disney's initial deal with Fox rather than the US. Offer even bigger protections. These provisions include a $ 2.5 billion break-up fee payable to Fox by Disney if the transaction was blocked by the regulators – a point that has now become questionable for Disney. Comcast has offered to cover the $ 1.52 billion costs that Fox would have to pay to Disney's back on the pact that was reaffirmed by Fox's board at the highest price on June 20th. Top bid at Disney's initial bid, the value of the $ 2.5 billion break-up fee fell to 2.2% of the value of the transaction, compared with 2.9% under the US dollar. $ 52.4 billion initial offer from Disney.

Comcast has been shown to be aggressive in stating that there should not be many regulatory warning signals given the nature of the badets under consideration and the fact that its cable operations are regional and non-national. . But the recent success of the cable giant in Washington – where opposition and concerns over Comcast's share of the broadband market have exhausted its proposed buyout of Time Warner Cable in 2015 – have clearly scared members Fox's board of directors.

In addition, Fox's badets on the table include Fox's 30% stake in Hulu. Comcast, through its acquisition of NBCUniversal in 2011, was forced by the Department of Justice to play a pbadive role in managing Hulu for seven years, fearing that Comcast would try to prevent Hulu from competing its cable operations. An agreement that would give Comcast majority control of Hulu could be a hindrance for antitrust regulators "given that the DOJ has placed the conditions on Comcast ownership of a similar minority position in Hulu, LLC in the 2011 expiring consent decree ", according to the filing of the SEC.

Comcast is banking on the fact that Fox's board of directors has the fiduciary duty to consider higher bids despite the unanimous approval of the board of directors of the latest offer of Disney. But there are also more and more questions about Comcast's ability to fund an even higher offer that would go beyond Disney's latest proposal.

The Wall Street Journal reported Wednesday that Comcast could seek to attract partners if the auction reached $ 90 billion. In this scenario, Comcast could take Fox's international badets while a partner would focus on 20th Century Fox's studio, FX Networks, and other US-centric companies, according to the Journal. For Fox shareholders, the prospect of carving the company might be less appealing than Disney, which absorbs companies that have long been under the same roof.

Disney's June 20 offer also includes a combination of cash (relative to the December 14 stock structure) and gives Fox shareholders the opportunity to decide how much cash or stock they should receive. . It's also an attractive component for Fox's board of directors, according to the SEC filing.

"The equity component of the merger offers 21CF shareholders the opportunity to participate in the future growth and opportunities of the merged company, and the 21CF Board's positive view on the potential proposition of value creation at 21CF. 21CF long-term shareholder transaction with Disney based on the complementary nature of (Fox's badets) with Disney companies and the relative attractiveness of Disney's equity currency and equity resulting from the combined company, "the deposit said.

Disney's approach to competition proposed by Comcast has been to take advantage of its advantage by having already entered into a preliminary agreement with the Fox Board of Directors. During discussions between the Disney and Fox camps between June 15 and June 19, Disney's Kevin Mayer made it clear that "any leak or public disclosure of the potential proposal would not result in any proposal from Disney." .

Mr. Mayer also told Fox Camp that if Fox's Board of Directors approved Comcast's June 13 offer, Disney would withdraw its higher bid and would rely on its corresponding right to conclude the case – a scenario that could be less lucrative for Fox's shareholders.

Rupert Murdoch, Executive Chairman of 21st Century Fox, Lachlan Murdoch, and Viet Dinh, a member of Fox's board of directors, recused Fox's board vote on Disney's June 20 bid because They are intended for the new roles of the New Fox entity. house the remaining badets that are not part of the sale.

Meanwhile, Disney is now on the hot seat to align buyers for Fox's 22 regional sports networks as part of the DOJ's agreement. We do not expect New Fox to try to hold them back. The channels, including Yes Network in New York and Fox Sports West in Los Angeles, are valued at about $ 19 billion, according to MoffettNathanson Research. Speculation about potential buyers ranges from John Malone's Liberty Media group to cable operators such as Charter Communications and Altice USA to the digital giants that plunge into the video, namely Facebook and Amazon.