Comcast Considers Reviving Pursuit of Fox After Higher Bid Was Rejected

Cable giant’s offer for Fox’s entertainment assets was in the low $60 billions, exceeding Disney’s winning offer

 

Comcast Corp. is considering reviving its pursuit of 21st Century Fox, after its bid for the company’s entertainment assets was turned down for that of eventual buyer Walt Disney Co. PHOTO: RICHARD B. LEVINE/ZUMA PRESS

Cable giant Comcast Corp. CMCSA -0.09% is contemplating reviving its pursuit of 21st Century Fox , FOX 2.36% after its bid for the company’s entertainment assets was turned down despite being over 15% higher than that of eventual buyer Walt Disney Co. DIS -0.34%, according to people familiar with the situation.

Disney DIS -0.34% struck a deal with Fox in December, agreeing to pay $52.4 billion in stock. Fox turned down a Comcast offer that was in the low-$60 billions range, the people said. The assets on the table in both offers were essentially the same, including the Twentieth Century Fox movie and TV studio, international pay TV properties and some U.S. cable networks.

Fox’s primary concern about the Comcast bid was that a tie-up between the companies would face significant antitrust risks, people familiar with the discussions said.

A Comcast acquisition of Fox would be a “vertical” deal adding more cable TV channels to a company that also is a powerhouse in channel-distribution. The government signaled concerns about vertical deals when it sued to block AT&T Inc.’s acquisition of Time WarnerInc., a case that heads to trial next month. Some Wall Street analysts noted the potential roadblocks in Washington to a Comcast-Fox deal.

Comcast believed it had offered substantial protections in its offer against antitrust risk, some of the people familiar with the situation said.

Fox executives positioned the Disney deal as a chance for its investors to benefit from Disney’s vast content machine and plans to battle the likes of Netflix Inc. with direct-to-consumer streaming services. After an asset sale, the remaining “new Fox” would have properties including the Fox broadcast network, Fox News and Fox Sports 1.

21st Century Fox Chief Executive James Murdoch, son of Executive Chairman Rupert Murdoch, may get a position at Disney if the deal is completed. It is also possible the younger Mr. Murdoch could strike out on his own.

The Murdoch family controls a 39% voting interest in both 21st Century Fox and Wall Street Journal-parent News Corp.

A Disney spokeswoman didn’t immediately respond to a request for comment.

Comcast may choose to take no further action. One key development that could influence its thinking is Fox’s release of a proxy statement on the merger, which would likely indicate the general process that led up to sealing a deal. It is unclear when Fox will file its proxy with regulators, ahead of a shareholder vote on the deal.

Though such documents don’t generally use specific company names, they can reveal how many bidders were serious contenders. Comcast will be looking for whether the proxy is clear that its bid was far higher than Disney’s, and for signs that it was considered seriously, some of the people familiar with the situation said.

Another key factor is the AT&T-Time Warner case, as earlier reported by CNBC. If the deal survives the government’s challenge, Comcast would be emboldened because it would believe Fox’s argument of antitrust risk in a Comcast-Fox deal would be weakened, those people said.

Comcast might be prepared to offer protections to Fox such as agreeing to remove certain assets from the deal that prove controversial in Washington, including regional sports channels, one of the people familiar with the situation said. It is also possible that instead of re-engaging in pursuit of all of the Fox assets, Comcast could zero in on something in particular, such as European pay TV giant Sky, some of the people said. Fox’s attempt to purchase the remaining 61% of Sky it doesn’t own has run into turbulence in the U.K.

Comcast, like Disney, believes Fox’s assets could help it bulk up in content production, get more exposure to growing international assets like Fox’s Star India, and allow it to increase its stake in online video service Hulu, which is co-owned by Comcast, Disney and Fox. Consolidation in the cable and media industries has pressured companies to explore big transactions.

There are a range of factors that can influence a company’s decision to turn down a higher purchase offer. In stock deals, the future value of the buyer’s stock is an issue, as is the control powerful constituents would have.

Comcast has a dual-class share structure that gives Chief Executive Brian Roberts one-third of the shares’ combined voting power, while Disney has only one class of shares. The Murdoch family would be influential shareholders at Disney.