Here's What Comcast Is Up Against to Wrest Fox From Disney

(Bloomberg) -- Walt Disney Co.’s $52.4 billion deal for much of 21st Century Fox Inc. seemed to be moving along as planned. Then Comcast Corp. came back into the picture.

Here’s why Comcast could be willing to go after Fox again -- after losing out to Disney two months ago -- and what hurdles it would face.

Sky Interest

Comcast’s earlier attempt to buy film and TV assets from Fox centered on European pay-TV giant Sky Plc, a person familiar with the matter said at the time. The broadcaster, the target of a bid by Fox for the 61 percent it doesn’t already own, is likely driving Comcast’s interest this time around, too, said Neil Campling, a senior analyst at Mirabaud in London. The rationale is simple: The cord-cutting that’s battered the U.S. cable industry isn’t as pronounced in Europe.

“You can see the attraction of diversifying away from the U.S. because of pressures on the cable industry there,” Campling said. “The regular annuity stream that you have for that kind of business subscription will be of primary appeal to Comcast.”

Comcast also may be more optimistic about Fox’s bid for Sky, which is going through regulatory review, he said. As Fox negotiates concessions with the U.K.’s Competition and Markets Authority, there could be progress in the next couple of weeks, Campling said.

Comcast declined to comment, while a representative for Fox didn’t immediately return a request for comment.

There are financial, regulatory and relationship hurdles for Comcast, however.

Financial Cost

Fox would have to pay Disney $1.53 billion if it were to walk away from the deal, according to the terms of their agreement. That said, Comcast previously offered about $60 billion for many of Fox’s assets, a sum that would more than cover the break fee.

Billionaire Rupert Murdoch, Fox’s co-chairman, opted for Disney’s lower $52 billion bid, believing the home of Mickey Mouse would run into less resistance from regulators, a person familiar with the matter said at the time.

Regulatory Scrutiny

There are potential antitrust challenges for both suitors.

Philadelphia-based Comcast is the largest cable provider in the U.S. and the Justice Department has shown it’s resistant to approving deals between big TV distributors and programmers with its attempt to prevent AT&T’s $85.4 billion purchase of Time Warner Inc. A tie-up with Fox would combine Fox’s pay-TV channels like FX and National Geographic with Comcast’s NBCUniversal cable channels like Syfy and Bravo.

After Comcast’s attempt to acquire Time Warner Cable Inc. in 2015 was blocked by regulators, it may not want to run the risk of government resistance again with Fox in the U.S., said Claire Enders, founder of media research firm Enders Analysis. Comcast also had a “very demanding” review over the acquisition of NBCUniversal, Enders said.

“Comcast has fewer hurdles to clear in Europe, but my heavens, the U.S. situation would be pretty difficult,” Enders said.

For Disney, buying Fox’s studio and regional sports networks would make it a larger player in Hollywood and sports broadcasting than a tie-up between Comcast and Fox. Even with praise from President Donald Trump over the deal, Disney’s dominance could be a concern for regulators.

Murdoch Sons

Winning over Fox’s largest shareholders, the Murdoch family, would be key to elbowing out Disney. The Murdoch Family Trust controls almost 40 percent of Fox’s Class B voting shares, giving them significant clout despite only owning about a 17 percent financial stake.

Part of the family’s calculation could include the career prospects of Rupert’s sons, James and Lachlan. Lachlan, the elder son who is co-chairman of Fox, is being seen by some observers as the most likely to take over the “new Fox” -- the assets left after the sale to Disney of much of the empire.

And while there’s been no public guarantee, Fox Chief Executive Officer James Murdoch could eventually be offered a senior job at Disney, after the deal closes.

To contact the reporter on this story: Joe Mayes in London at jmayes9@bloomberg.net.

To contact the editors responsible for this story: Rebecca Penty at rpenty@bloomberg.net, Mark Schoifet

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