Comcast Is Said to Target Fox Investors on Disney Counterbid

(Bloomberg) -- Comcast Corp. will approach 21st Century Fox Inc. shareholders as soon as this week to discuss its plan to snatch away the media company’s trove of entertainment properties from rival suitor Walt Disney Co., according to a person briefed on the matter.

The cable giant also has told the Justice Department about its interest in the Fox assets, an early step in addressing antitrust concerns about a potential transaction, according to the person, who asked not to be identified because the deliberations are private.

Comcast is laying the groundwork for a deal after confirming its desire to outbid Disney for the Fox operations, which represent most of that company’s entertainment holdings. Disney has already agreed to buy the 20th Century Fox film studio and cable channels such as FX for about $52 billion, and it’s working toward completing the acquisition.

A new bid from Comcast would value the Fox assets at more than the $34.31 a share that the Philadelphia-based cable provider offered last year, a separate person with knowledge of the situation said. That offer was at least 16 percent higher than Disney’s winning bid, according to a regulatory filing in April that described rival talks with a group described as Party B but widely known to be Comcast.

Comcast’s move would escalate a bidding contest that’s already underway over Fox’s European satellite business -- and further complicate a global game of M&A chess that’s being waged by the biggest media companies.

Comcast “is considering, and is in advanced stages of preparing, an offer for the business that Fox has agreed to sell Disney,” the company said in a statement on Wednesday. “Any offer for Fox would be all-cash and at a premium to the value of the current all-share offer from Disney.”

Warning Shot

Wednesday’s announcement was meant to give warning to Fox investors that they shouldn’t rush to accept a Disney deal, the person familiar with the matter said.

While no final decision has been made, Comcast said its work to finance the offer -- and preparation to file key regulatory statements -- is “well advanced.” Comcast has been talking to investment banks about obtaining bridge financing for the all-cash deal, a person with knowledge of the discussions said earlier this month.

A counterbid would roil a plan by Disney Chief Executive Officer Bob Iger to bolster the company’s dominance in entertainment. Fox agreed in December to sell its film and TV studios, cable channels including FX and National Geographic and other assets to Burbank, California-based Disney in an all-stock deal. Comcast said at the time that it “never got the level of engagement needed to make a definitive offer.”

Disney plans to use the bigger stable of TV and movie properties in part to stream more content directly to consumers.

‘Devastating Blow’

“If Comcast won these assets from the arms of Disney, it would be a devastating blow to Iger,” Daniel Ives, an analyst at GBH Insights, said in a note.

Comcast investors gave a tepid reaction to the idea. The stock declined 1.9 percent to $31.88 on Wednesday. Even before the announcement, Comcast’s expansion plans have weighed on the shares, which were down 19 percent this year through Tuesday’s close.

Shares of Fox closed up 1.6 percent at $38.77, while Disney fell 1.1 percent to $102.89.

Fox declined to comment on Comcast’s statement. After earlier reports that Comcast was considering a possible bid, Fox said it was committed to completing its deal with Disney.

“We’re not going to kind of engage in a lot of speculation around this,” Fox Executive Chairman Lachlan Murdoch said two weeks ago on a conference call following earnings.

Sky Bid

Comcast is already making an ambitious push in Europe that centers on U.K. satellite broadcaster Sky Plc. After Fox made a takeover offer for the 61 percent stake in Sky that it doesn’t already own, Comcast launched a 22 billion pound ($30 billion) counterbid for the business. Disney also is interested in owning Sky.

Comcast won approval on Monday from the U.K. government to move ahead with its offer for Sky. The company, which owns NBCUniversal, already has a wide array of broadcast and cable networks, as well as the Universal Pictures movie studio and a number of theme parks.

AT&T Case

Comcast’s plans for Fox, meanwhile, may hinge on the fate of another deal: AT&T Inc.’s attempt to acquire Time Warner Inc. If that transaction is thwarted on antitrust grounds, Comcast may fear similar treatment if it continues to pursue Fox.

Like a Comcast deal for Fox’s assets, the AT&T proposal is an example of a large TV distributor attempting to own a TV programmer -- what’s known as a vertical merger. A judge is slated to rule next month whether to block or allow the AT&T transaction.

Comcast is likely to wait for that decision before officially making its new offer, one of the people familiar with the situation said. A representative for Comcast declined to comment on the timing or potential price of a bid.

Both Disney and Comcast also are looking to expand overseas and offer more content directly to consumers. Fox’s assets would help both companies achieve these goals, said Paul Sweeney, an analyst at Bloomberg Intelligence.

That’s why a bidding war could be intense.

“Disney is likely to put up quite a fight,” he said.

©2018 Bloomberg L.P.