Disney Gets Bids From Apollo and MLB for Fox Sports Networks
Signage is displayed outside the entrance to Twenty-First Century Fox Inc. Studios in the Century City neighborhood of Los Angeles, California, U.S. (Photographer: Patrick T. Fallon/Bloomberg)

Disney Gets Bids From Apollo and MLB for Fox Sports Networks

(Bloomberg) -- Walt Disney Co.’s effort to sell a collection of 22 regional sports networks hasn’t been a slam dunk.

When the company set out to unload the assets -- a side deal necessitated by its $71 billion takeover of 21st Century Fox Inc.’s entertainment empire -- analysts estimated that they could fetch $20 billion to $22 billion.

But the New York Yankees decided to buy back their network from the group, removing the crown jewel. And several deep-pocketed potential suitors, including Comcast Corp., Discovery Inc. and Fox itself, bowed out of contention.

Disney did attract second-round offers by Thursday’s deadline from potential buyers including Sinclair Broadcast Group Inc., Apollo Global Management and Major League Baseball, according to people familiar with the sale process. But the proposals valued the remaining networks at roughly six to eight times earnings before interest, taxes, depreciation and amortization, the people said.

That may mean the bids are closer to $10 billion -- aside from the billions that the Yankees channel may bring.

‘How Much’

One problem: The current suitors don’t have the kind of clout to force pay-TV providers to keep offering the networks, said Rich Greenfield, an analyst at BTIG LLC.

“How much would you pay if you can’t ensure you won’t be dropped or tiered in the future?” he said. “That makes it hard to bid a big number.”

Major League Baseball is seen as a long-shot acquirer. It’s still looking for a partner that could bolster its bid, according to people familiar with its thinking. The organization declined to comment, as did Apollo. Disney and Fox also didn’t have an immediate comment on the process. A representative for Sinclair didn’t immediately respond to a request for comment.

MLB has support from the Canada Pension Plan Investment Board, but the league has been seeking the kind of strategic partner that could ensure the networks get good distribution from pay-TV companies, according to one of the people. The New York Post previously reported on the Canadian Pension Plan’s involvement.

The Yankees, meanwhile, are looking to buy back the 80 percent of their sports network that they don’t already own. That business, called the YES Network, carries games from the Yankees and the Brooklyn Nets. The storied New York baseball team has been lining up partners and financing from Amazon.com Inc. and investment firms, people familiar with the situation said in November.

A sale of the YES Network was thought to make it easier for Disney to unload the remaining channels because the cost would be lower. But the small number of potential bidders has made the process harder.

Regulators’ Blessing

Disney is expected to complete its acquisition of Fox’s assets in the first half of this year. It agreed to sell the sports networks in a deal with the U.S. Justice Department, which was concerned that Disney would be too dominant in the sports-broadcasting market since it already owns ESPN.

Disney’s investment bankers, Allen & Co. and JPMorgan Chase & Co., have been meeting with buyers and sharing more extensive financial details than the parties got in the first round. Potential buyers also met with Fox executives to discuss the businesses.

While Disney’s bankers have suggested spinning off the networks to shareholders, the company is committed to selling them, the people with knowledge of the matter said earlier this month. A spinoff would require approval from the Justice Department, but the agency is likely to give the green light.

©2019 Bloomberg L.P.

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