As expected Comcast is attempting to outbid the Walt Disney Co. for assets 21 Century Fox has agreed to sell to Disney.
The Comcast offer is for $35 a share in cash, which the company says is worth 19% more than the Disney offer, which is comprised of Disney stock.
Comcast had offered to buy the assets, which include entertainment cable channels including FX and Fox’s TV and movie schedules, but Fox, lead by Rupert Murdoch, preferred Disney stock to Comcast’s.
The move comes a day after a federal court ruled that the government could not prevent AT&T from buying Time Warner on antitrust grounds. The ruling was seen as opening the door for a rush of merger activity in the TV business.
Comcast said its bid values 21st Century Fox at an equity value of $65 billion. Comcast has lined up financing from Bank America Merrill Lynch and Wells Fargo and said its proposal is not subject to financing conditions.
Comcast said it has agreed to divest the same assets as Disney has agreed to in order to avoid regulatory challenges. Those assets include Fox's regional sports networks. It is also agreeing to a termination fee of $2.5 billion if the transaction can't be closed because of a denial by regulators.
The cable company will also reimburse Fox for the $1.525 billion breakup fee it would have to pay Disney if the Disney transaction is not completed.
Comcast sent a litter to Rupert Murdoch and his sons, Lachlan and James. Here is what the letter said:
Dear Rupert, Lachlan and James,
We have long admired what the Murdoch family has built at Twenty-First Century Fox. After our meetings last year, we came away convinced that the 21CF businesses to be sold are highly complementary to ours, and that our company would be the right strategic home for them.
So, we were disappointed when 21CF decided to enter into a transaction with The Walt Disney Company, even though we had offered a meaningfully higher price. We have reviewed the publicly available terms of the proposed Disney transaction, as well as the joint proxy statement/prospectus filed with the SEC describing the reasons for the 21CF Board of Directors’ decision. In light of yesterday’s decision in the AT&T/Time Warner case, the limited time prior to your shareholders’ meeting, and our strong continued interest, we are pleased to present a new, all-cash proposal that fully addresses the Board’s stated concerns with our prior proposal.
Our new proposal offers 21CF shareholders $35.00 per share in cash and 100% of the shares of New Fox after giving effect to its proposed spinoff, providing superior and more certain value as compared to Disney’s all-stock offer. Our proposal represents a premium of approximately 19% to the value of Disney’s offer as of noon today. We are highly confident in our ability to finance the transaction, and our offer includes no financing-related conditions.
We are also highly confident that our proposed transaction will obtain all necessary regulatory approvals in a timely manner and that our transaction is as or more likely to receive regulatory approval than the Disney transaction. Accordingly, we are offering the same regulatory commitments as the ones 21CF has already obtained from Disney, including the same $2.5 billion reverse termination fee agreed to by Disney. To further evidence our commitment, we also are offering to reimburse the $1.525 billion break-up fee to be paid by you to Disney, for a total cost to Comcast of $4.025 billion, in the highly unlikely scenario that our transaction does not close because we fail to obtain all necessary regulatory approvals.
We welcome the opportunity to discuss the regulatory issues presented by each deal. We note that there should not be any meaningful difference in the timing of the U.S. antitrust review between a Comcast and Disney transaction. We have made our HSR filing today, which formally begins our regulatory review at the DOJ. In addition, we have already submitted a large volume of documents and data to the DOJ in connection with its review of the Disney transaction. This information largely overlaps with the information that the DOJ will need to review a Comcast transaction. As a result, our transaction should be reviewable by the DOJ in the same cycle as Disney’s transaction. We similarly expect that our transaction should be reviewable by international regulators in as timely a manner as the Disney transaction, and should be as or more likely to receive international approvals, given our relatively small presence outside the U.S.
Our Board of Directors has unanimously approved this proposal, and no Comcast shareholder vote will be required for this transaction.
Because of your decision to schedule the vote on the Disney merger proposal for July 10, time is of the essence for your consideration of our proposal. We are available to meet at any time to answer questions of the Board, management or your advisors, so that you are in a position to validate the superiority of our offer, and negotiate and enter into a merger agreement, as soon as possible thereafter. Given the very short time frame, today we are filing a preliminary proxy statement with the SEC in opposition to the Disney merger proposal, as we have been advised this is necessary to be in a position to be able to communicate with your shareholders directly regarding the votes they are being asked to cast on July 10. We hope this is precautionary only, as we expect to work together to reach an agreement over the next several days.
More detailed information regarding our proposal is attached.
I look forward to our discussions and working with you toward completing this exciting transaction for the Fox shareholders.
Very truly yours,
Brian L. Roberts
Chairman and CEO