It's game on.
Comcast Corp made a $65 billion cash offer for the Fox assets that Rupert Murdoch-controlled 21st Century Fox is selling to the Walt Disney Co. - setting up what may be a punishing takeover battle between the two legacy media giants.
Comcast made the announcement only 24 hours after U.S. District Richard Leon approved AT&T's $85 billion deal for Time Warner. Leon soundly rejected the government's claim that AT&T/Time Warner would be anti-competitive and harm consumers, opening the door for a Comcast deal for Fox.
Comcast has scheduled a conference call with analysts and investors to discuss its offer made to Rupert Murdoch and the Fox board..
A successful deal would sweep U.S.-based Comcast into international markets through the Fox International Networks, Star India, and Sky satellite-television service in Europe, with 70 percent of the $38 million in revenue associated with the Fox assets coming from overseas.
In the United States, the deal would add more than 20 regional Fox sports networks, the FX and Nat Geo cable channels, Fox's investments into media start-ups, a 30 percent stake in Hulu, and Fox television and movie studios and content libraries that include Avatar, X-Men, Fantastic Four, Deadpool, and the Shape of Water. The Fox studios could be bolted onto the Comcast-owned Universal and DreamWorks studios.
The deal would make Philadelphia-based Comcast a more diversified company, both in products and geographically, and would to closer relationships with Europe's Sky satellite-TV business, which would work with Philadelphia engineering teams.
The Walt Disney Co. reached a $52.4 billion all-stock deal for the Fox assets in December and is expected to counter Comcast's higher, $65 billion cash offer. Comcast essentially matched Disney's other inducements to Fox to do a deal, which included a $2.5 billion fee to be paid to Fox if government regulators reject the deal.
Murdoch picked Disney over Comcast in late 2017, even though Comcast offered a premium to Disney's all-stock deal, according to regulatory filings. Among the stated reasons Murdoch went with Disney was his belief that Disney could more easily obtain regulatory approval in Washington than Comcast. But this may not be an issue after Judge Leon's ruling - which Comcast had been waiting for.
Murdoch also may prefer Disney's stock bid, some believe because it would shelter the Murdoch family's Fox holdings from taxes in a cash deal, one major Fox shareholder has suggested.
Comcast and Disney, two of the largest entertainment and media companies in the United States, have deep pockets and slowing core U.S. businesses. For Comcast, it's the cable-TV business. For Disney, it's ESPN.
"Disney can compete financially with Comcast," Michael Nathanson, research analyst with the MoffettNathanson LLC firm, said on Wednesday. "The question is will. Does (Disney's) Bob Iger have the will to follow (Comcast's) Brian Roberts, you know, onto the beach on Normandy?"
Nathanson and his partner, Craig Moffett, said that Disney may have more financial resources to do a deal. But Moffett added that "Bob Iger is more beholden to shareholders than Brian Roberts" - because of Roberts's super-voting shares in Comcast.
"We know from the personalities involved there will be blood on the floor somewhere," Susan Crawford, professor at Harvard Law School and author of Captive Audience about the Comcast/NBCUniversal merger. "It's clearly going to be a battle of male wills. These are guys who are used to being in control and want their way and will do about anything to get it."
Of Murdoch, she added that "it's hard to imagine an 87-year-old media mogul being in the backseat."
The Fox deal also could give Comcast, or Disney, additional content scope and scale to take on on-demand streaming services from Netflix, Google, and Amazon, many believe. These new streamers are spending billions of dollars a year on content - $8 billion by Netflix alone - for their subscribers. There generally has been an explosion of television and entertainment production as legacy companies and streamers chase eyeballs - a chase currently being won by streamers.
While Comcast has lost about 200,000 cable-TV subscribers since late 2016, Netflix's global membership has soared by 22.3 million to 125 million in well over 100 countries.
Netflix now has a market cap higher than Comcast or Disney on Wednesday afternoon on Wall Street: $165.6 billion for Netflix, $149 billion for Comcast, and $158.5 billion for Disney.
"It's about keeping up with Netflix and Google and Facebook. It's all about content," Brad Adgate, a longtime media analyst and consultant in Cambridge, Mass., said on Wednesday. "The best chance (for Comcast) to make an offer that shareholders can't refuse."
Comcast and Disney have concluded that greater growth exists outside the United States - and Fox would let them tap into this. Sky has 23 million subscribers in the UK, Ireland, Germany, Austria, and Italy. Star India operates 69 channels reaching 720 million viewers a month in India and 100 other countries. Fox Networks International distributes 350 channels in 170 countries.
Iger's Disney also could combine ESPN with the Fox regional sports networks in Detroit, Los Angeles, Atlanta, and other cities, monopolizing both regional and national sports fan viewership in TV markets with Fox regional networks and ESPN.
Murdoch, who has President Trump's ear, is dismantling his Fox empire, focusing his remaining assets on the conservative Fox News Channel, business and sports cable channels, and the Fox broadcast-television network - and selling basically everything else.
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