As Expected, Comcast Bids for Fox
While the offer is above Disney's, Disney probably won't need to significantly outbid Comcast if and when it sweetens its all-stock offer with cash.
Comcast (CMCSA) made its expected bid for the Fox (FOX) assets on Wednesday as the firm publicly announced an all-cash offer of $35 per share or $65 billion, 19% above the $55 billion offer from Disney (DIS). This offer is slightly above the $34.14 per share all-stock offer that Comcast made in November 2017. Management stressed that its new offer is structured in a similar manner to the Disney one and claimed that the judicial decision about the AT&T and Time Warner merger makes the Comcast offer as likely to receive regulatory approval as the Disney offer. As we noted on Tuesday, Disney has reportedly been meeting with bankers to find funding to sweeten its all-stock bid with cash. We believe that a Comcast offer will trigger a bidding war between Comcast and Disney as both companies look to bulk up to compete. We are maintaining our wide moat ratings for all three companies and fair value estimates of $130 for Disney, $42 for Comcast, and $43 for Fox as we await a response from Fox and Disney.
The terms of the bid largely mimic the Disney bid, as management noted in the conference call. Comcast is offering a similar $2.5 billion reverse termination fee payable to Fox if the deal fails to pass regulatory muster and will pay the $1.525 billion break-up fee due to Disney if Fox pulls out of the deal. Comcast is also willing to make the same concession as Disney in order to gain regulatory approval--the spin-out or sale of the Fox regional sports networks. We believe that Comcast may actually be more likely than Disney to be required by regulators to sell off the RSNs as Comcast already own seven RSNs. While the all-cash offer is above the Disney all-stock offer, we note that the Murdoch family appears to prefer the Disney shares and the preferable tax implications of an all-stock deal. As a result, we expect that Disney will not need to significantly outbid Comcast if and when Disney sweetens its all-stock offer with cash.
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Neil Macker does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.