Bidding for Fox Will Get Serious After Court Ruling

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Not so long ago,

Rupert Murdoch’s

decision to sell the crown jewels of his media company,

21st Century Fox
,


FOX 2.39%

looked like an acknowledgment that the sun was setting on his reign. Now, as

Disney


DIS 0.67%

and

Comcast


CMCSA -0.19%

prepare to do battle over those coveted assets, Mr. Murdoch looks set to go out in a blaze of glory.

On Tuesday, a U.S. federal judge will determine how glorious that blaze can be. The judge is scheduled to rule on

AT&T
’s


T 1.39%

acquisition of

Time Warner
.


TWX 0.72%

If the deal is approved outright, it will be a green light to Comcast to make a formal bid for Fox assets—a vertical merging of distribution and content similar to AT&T-Time Warner.

Comcast’s bid, which is reportedly planned as a $60 billion all-cash offer, would top Disney’s $52.4 billion all-stock offer. Disney would then sweeten its bid and a high-stakes battle would ensue, driving up the value of Fox.

Of course, the Justice Department may still object to a Comcast acquisition of Fox assets even if it loses its case against AT&T. But it would have a much harder time blocking the deal.

Alternately, if the U.S. government wins its case against AT&T, blocking the merger, it will throw cold water on Comcast’s plans. “It will embolden the Justice Department to be more forceful,” says Gene Kimmelman, a former Justice Department antitrust attorney. That would likely leave Disney the winner, even if it doesn’t raise its offer.

The messiest—and perhaps most likely—scenario is that the AT&T trial resolves somewhere in the middle, with the judge rejecting the government’s remedy and saying the deal can go through if it meets specific conditions. The Justice Department is unlikely to be pleased by that; it has been trying to get away from such remedies, which are difficult to oversee and which force it to play the role of industry regulator. It may appeal the decision.

This scenario is murky for Comcast and for Fox. It means the government will still be inclined to toughen oversight of Comcast, though how successfully is uncertain. A Fox-Disney merger could also invite scrutiny, because of the company’s control over sports programming and its power on the studio side. But these can likely be remedied without blocking a deal.

“More regulatory clouds hang over Comcast than Disney,” says Mr. Kimmelman.

The battle would reverberate across the Atlantic, potentially pushing up the value of Sky, the satellite TV company, which is 39% owned by Fox. Right now shares trade at 13.59 British pounds, well above the current offers, but as the only option for growth in the U.K., Sky is a crucial piece in the new-media puzzle.

Mr. Murdoch will have to weigh all of this as he decides which offer to accept. Disney and Comcast will fight to the bitter end. No other media assets are as attractive as Fox’s and both companies see them as a necessity to compete globally with

Netflix

in the new-media world. (Fox and

News Corp
,

publisher of The Wall Street Journal, share common ownership.)

The battle is personal, too: Comcast Chief Executive

Brian Roberts,

who lost a bid for Disney in 2004, is loathe to see it pull ahead. Meanwhile, Disney CEO

Bob Iger

doesn’t want to close out his career by losing the shiniest piece on the chessboard.

For the Murdochs and for Fox investors, it is hard to imagine a more brilliant way to end the empire.

Corrections & Amplifications
21st Century Fox owns 39% of Sky. An earlier version of this article incorrectly stated Fox owned 61% of Sky. (June 10, 2018)

Write to Elizabeth Winkler at elizabeth.winkler@wsj.com

Appeared in the June 11, 2018, print edition as ‘Fox Bidding to Heat Up.’



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