Comcast Pulls Out of the Fox Bidding War
Although Comcast may still vie for Sky, we think Disney will close on the Fox deal soon.
Comcast (CMCSA) announced on July 19 that it is ending its pursuit of Twenty-First Century Fox (FOX) assets to focus on acquiring Sky. The capitulation clears the way for Walt Disney (DIS) to acquire the Fox assets pending shareholder votes at both firms on July 27. If the shareholders approve the transaction as expected, the deal could close soon afterward.
However, Disney may delay the close to line up buyers for the 22 regional sports networks that the firm must divest within 90 days of the close to fulfill its agreement with the U.S. Department of Justice. While Comcast can now increase its bid for Sky, the flexibility may not be necessary, as Disney recently filed papers implying that it might not support an improved bid by Fox. We are maintaining our wide moat ratings for all three firms as well as our fair value estimates of $42 for Comcast, $46 for Fox, and $130 for Disney.
As a reminder, Disney's current offer to Fox is $38 per share in either cash or shares of Disney, but the firm will prorate the redemptions if either option is oversubscribed. The company is expected to pay out roughly $35.7 billion in cash and issue over 340 million new shares. The stock portion of the deal is subject to a collar, with Fox shareholders receiving $38 in Disney shares if the average price at closing for Disney shares is between $93.53 and $114.32. Fox shareholders will receive 0.3324 Disney shares per Fox share if the average price is above $114.32 and 0.4063 shares if the average price is below $93.53. Fox shareholders will also receive shares in NewFox, which will be spun out after the transaction. NewFox will be controlled by the Murdoch family and will own the Fox broadcast network, the owned and operated television stations, Fox News, FS1, and Fox Business News.
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Neil Macker does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.