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AT&T / Time Warner merger approved - we now enter Thunderdome

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A judge has unconditionally approved the AT&T / Time Warner merger.

Now the fireworks between Disney and Comcast for Fox will begin.


Thunderdome: Two mega companies enter.  One Big Ass Mega company leaves.


Who do you think will win?

Who do you want to win?


Disney is currently offering $52.4 Billion

Word is that Comcast will counter with an all-cash bid around $60 Billion

Grab a box of curry popcorn, cause this is gonna be good.


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Now that the federal judge has all but guaranteed that Fox could be purchased for any dollar value, without a chance of having to defend against anti-monopoly claims, the bidding war may take off.  Regardless of the judge's ruling, any Fox buyout would still need to pass regulatory approval; it's just much less uncertain now.


As expected, Comcast bid $65B in cash - 19% higher than Disney's $52.4B bid, which was an all-stock offer.

But remember, Fox has not responded to the bid yet.

In fact, Fox shareholders will vote on Jul 10 on the Disney bid.

Nothing forces Fox to even entertain the Comcast bid.


So here's what could happen:

Disney could sit still and wait for the Jul 10 vote.  Shareholders could go with the lower Disney bid on the table.  They will NOT be voting on the Comcast bid.  Voters could reject the Disney bid - and then all hell may break loose.

Disney could up the stakes even before Jul 10.  I believe the Jul 10 vote would then be based on the higher bid.

To which Comcast could up their bid, all ahead of the Jul 10 vote.


Here an interesting thing, though: The July 10 vote may not even mention the higher Comcast bid.

Comcast is pleading with Fox to make sure their shareholders know well in advance of the July 10 vote that a higher offer is on the table.  After all, if you are a Fox shareholder and are not following this closely, you get a ballot that says Disney wants to buy Fox.  Disney?  I love Disney!  Sure!  So it is highly important that all voters know what is on the table.  In fact, if Fox did NOT do this and Disney won the vote, I could see Fox shareholders suing Fox because they were not made aware of a better offer.


Disney is expected to match the Comcast offer, but may need to take on tens of billions in debit to do so.

Many analysts are seeing bidding going to $80B or more.  Most expect Disney to win.


If Fox walks away from the Disney deal, it will owe Disney $1.5 Billion as a break-up fee, which is common on these sorts of acquisitions.

Comcast's offer includes reimbursing Fox for that fee to Disney.

Comcast's offer will also pay Fox $2.5 Billion in the event the transaction fails to pass regulatory approval.  Disney's offer promised the same.  That's interesting because Disney promised this while the ATT/Time Warner merger was still under scrutiny, so Disney had a decent chance of having to pay that; here, Comcast and Disney now both have a near zero chance of that happening.






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For those wishing Comcast comes out the winner, this is a bit sobering:


If Comcast was to win a bidding war against Disney for, say $85B, they would become the second-most indebited company (not counting banking companies), just behind the newly combined ATT/Time Warner.

Comcast's total debit would be around $170B, about triple what it is today.


Comcast has had a reputation of being quite conservative when it comes to the amount of debit it owes - they are not seen as reckless.  But this would be a major shift.  Consider that we are in a hot economy, and interest rates are rising.  Moody's (a company that rates the value of companies against risks) downgraded ATT/Time Warner based on the huge amount of debit it now owes.


Were Comcast to win, it's not out of the realm imagination that it could end up choking on its own debit to the point where it would be forced to sell off parts of its portfolio at fire sale prices (maybe to Disney?)


As I read these articles, it sure seems like Disney is ultimately going to be the one buying Fox.


Consider this:

Fox and Disney are already about six months into their deal.  It has passed many internal hurdles.  If they were accept Comcast's offer, that would have to start over.

Analysts say that Fox would prefer a stock offer rather than cash offer, so Comcast may not be as irresistible as one would think.


Fox's board of directors is scheduled to meet Wed 6/20 to discuss the Comcast offer.


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Disney upped its bid from $52.4B to $71.3B.  

Comcast's $65B bid was rejected, BUT Fox left the door open to Comcast raising their bid again.  Because Capitalism, man.

The vote that was scheduled for Jul 10 has been postponed, while a new ballot for shareholders is drawn up.  

Most analysts expect Comcast to increase its bid to at least $80B.


There is another fly in this ointment that is not being talked about much - Sky News

Sky is not small potatoes.  Outside of the US, Sky is huuuge.

Fox owns about 40% of Sky, and they want to purchase the rest of it.  They have an open $15.5B bid for the remaining 60% of shares of Sky.

But Comcast also wants Sky; they bid $28.3B for the remaining 60% of shares.  

This is all happening at the same time the DisneyComcastFox thing is going on.

In fact, by Jul 13, Comcast is expected to send an offer document to Sky shareholders.

Keep in mind that because that minority 40% ownership in Sky is part of the Fox portfolio that is for sale.


So consider how F-d up this could get:

If Disney purchases Fox, then Disney owns 40% of Sky.  Comcast could purchase 60% of it, making Comcast majority owner of Sky, with Disney as the minority partner.

Because Fox has agreed at this point to have Disney buy Fox (pending shareholder approval), Fox actually has to get Disney's permission to increase its bid for Sky, because if Fox increases their bid for Sky too much, it changes the valuation of Fox in both Comcast's and Disney's eyes.  This is a delicate balancing act. 

So Disney is competing against Comcast for Fox, and Fox and Comcast are both competing for Sky.


Possible outcomes:

Disney purchases Fox and Fox buys remaining shares of Sky - Disney is a monster media corporation, owning both Fox and 100% of Sky.

Comcast purchases Fox and Fox buys remaining shares of Sky - Comcast is a monster media corporation, owning both Fox and 100% of Sky.

Disney purchases Fox and Comcast buys remaining shares of Sky - Disney and Comcast are both powerhouses (but as far as Sky is concerned, Disney is Comcast's bitch!)


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So much has happened!


  • Comcast has dropped out of bidding on Fox assets, so it's looking like Disney will be the winner.
  • I say "looking like" because the government is having second thoughts on the ATT/Time Warner merger.  Although it was approved by a judge, the current Administration sees it as a too big a monopoly, and is attempting to override it.  That will take some time to adjudicate.  The idea of Disney buying Fox assets was seen as a gimme because of the ATT/Time Warner merger approval.  But with that potentially in peril....  And this isn't a "Trump thing", because Administrations on both sides are wary of monopolies.  It's a pendulum I've seen many times over my 51 years.  Companies keep merging until some Administration says "enough!".
  • Comcast is not completely out of the picture - they have made it clear that they want to buy 60% of Sky News (I mentioned that earlier).  It was pretty clear that Comcast didn't have the finds to purchase Fox AND Sky News.  This acquisition has a good possibility of happening.  Recall my prior comments on it:
    • Comcast is bidding for 60% of Sky against Fox
    • Fox already owns 40% of Sky News
    • Fox is being bought by Disney, so Disney will own 40% of Sky News
    • Fox cannot just up its bid because it is adding debit to the Disney deal - it is not straightforward
    • Disney can't bid on Sky News for the same reason Comcast couldn't buy both - way too much money and probably would be a monopoly.
    • The UK is opposed to Fox buying Sky News

So we could very well end up in situation where Comcast owns 60% of Sky while Disney owns 40%, and Disney owns 100% of Fox.


I have been personally rooting for Comcast, mainly because I do not like Disney's practices, but also because I wonder how Disney ownership will affect IP in Universal parks.  It seems to me that Fox has been adamant that they don't want to be bought by Comcast, so the deal seemed to be doomed from the get go.  The higher price Disney was forced to offer will put the brakes on Disney growth a bit - which I think was Comcast's plan.  Gin up the price, and make Disney pay. 


That Disney closes the deal with substantial debit will definitely have an effect for the next few years.  Don't think you will be seeing massive Fox-based projects at the Disney parks soon.


That's all my opinion, of course.


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Disney and Fox shareholders have approved the buyout by a 99% to 1% vote.  Boy, that was close.


This week Comcast raised its bid for Sky to $34B, up from 28.3B.

It is now up to Disney to counter this, if they want full ownership of Sky.

Disney is in a LOT of debit with the Fox purchase, but Iger is saying he still wants all of Sky...


I also did not know this: Ownership of Hulu is 30% Fox, 30% Disney, 30% Comcast and 10% AT&T.

So after the Fox deal, Disney will own 60% of Hulu and Comcast 30%.

So it's possible that Disney may eventually try to acquire Comcast's 30% of Hulu.

What a tangled web.

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