Comcast’s all cash offer may not go down well with Fox’s biggest shareholder, the Murdoch family, since accepting the deal would force it to potentially pay a multi-billion dollar capital gains tax.
In a move that has essentially sparked a bidding war between two of the biggest media companies in the U.S., Comcast Corp has offered to acquire Twenty-First Century Fox Inc for $65 billion, an offer which is 20% more than its peer Walt Disney Co.
Brian Roberts, Comcast’s CEO, said given the court’s pronouncement on Tuesday, which allowed AT&T Inc to acquire Time Warner Inc for $85 billion, he was very confident that regulators would allow Comcast to acquire the bulk of Fox Inc’s media assets.
The move is set to to create a blockbuster fight between two of the best known U.S. media companies. Comcast’s Roberts, who in 2004 led a failed bid for Disney, now faces Disney’s CEO Robert Iger, whose deal-making has added the likes of Star Wars, Pixar, Marvel Comics to the media giant.
Fox’s board will have to decide whether Comcast’s 20% hike over Disney’s offer is good enough for it. It has five business days to respond.
Comcast is likely to have a tough time winning over the Murdoch family, which has a 17% stake making it Fox’s largest shareholder. If the Murdoch family were to accept Comcast’s all-cash deal, as per tax experts it would face a multi-billion dollar capital gains tax.
Fox’s shareholders are set to vote on the issue on July 10, although the company could postpone the meeting, said Fox in a statement.
Many analysts foresee headwinds for the Comcast-Fox deal, which would add Fox’s movie and television studios to Comcast’s NBC Universal; in a letter to Fox, Roberts has said he would offer the same conditions as Disney and has promised to fight for the deal in court, if necessary.
The potential merger between the two would create a company which would have a repertoire of well-known franchises and media brands, including the X-Men superheroes. The combined company would also hold the right to air the U.S. rights to the Premier League Soccer, Olympics and Fox’s long running TV show “The Simpsons”.
Fox’s international assets, such as Star India, have appeal to both Comcast and Disney, with both wanting to expand their global presence.
Outlining its offer, which was similar to that of Disney’s, Comcast said it was committed to the same divestitures. It would also goto court if the Justice Department tried to block the deal.
Comcast cash offer of $35 per Fox share is in contrast to Disney’s stock offer worth $29.18 per share, at the close of trading on Wednesday.
Both Comcast and Disney have offered $2.5 billion in reverse termination fee if the deal did not realize. Further, Comcast also offered to pay Fox’s $1.525 billion breakup fee to Disney, if Fox decides to merge with it.
Furthermore, Comcast disclosed, it intends to pursue a $30 billion acquisition of Sky Plc in parallel with its Fox bid.
In its statement, Fox said it had received the Comcast’s proposal and would review it.
According to lawyers from the Justice Department, there could be potential antitrust concerns in the Comcast-Fox deal which places two movie studios and two major television brands under one roof.
“One cannot ignore the fact that there’s less independent content to go around,” especially after the AT&T deal, said Henry Su, an antitrust expert with Constantine Cannon LLP.
AT&T’s court fight has provided valuable information as to how Comcast could structure its deal in its bid for Fox, said David Scharf, a litigation expert with Morrison Cohen.