Sorry, Comcast: Fox and Disney sign new merger deal, rejecting Comcast bid

The Walt Disney Company and 21st Century Fox have struck a new merger agreement, with Fox’s leadership having rejected Comcast’s attempt to outbid Disney.

Under the amended acquisition agreement announced today, Disney would buy Fox for $71.3 billion in cash and stock. This comes one week after Comcast offered Fox $65 billion in cash, which topped Disney’s previous deal to buy Fox for $52.4 billion in stock.

Comcast could try to outbid Disney again, but it hasn’t yet responded to today’s announcement of a new Disney/Fox deal.

“The amended and restated Disney Merger Agreement offers a package of consideration, flexibility, and deal certainty enhancements that is superior to the proposal made by the Comcast Corporation on June 13, 2018,” Fox said.

Fox appears to be reluctant to strike a deal with Comcast because of concerns about getting regulatory approval from the federal government. Still, Fox said that the new Disney/Fox deal “contains no changes to the provisions relating to the company’s directors’ ability to evaluate a competing proposal,” giving Comcast an opening to bid again.

“Disney believes the transaction has a clear and timely path to regulatory approval,” Disney’s announcement said. “Both companies have spent the past six months working toward meeting all conditions necessary for closing. In the amended agreement, Disney has increased the scope of its commitment to take actions required to secure regulatory approval.”

Both Comcast and Disney have acknowledged that they might have to divest certain Fox properties, such as Fox’s regional sports networks, in order to get regulatory approval. In a potential Comcast/Fox deal, regulators could examine whether Comcast would gain too much negotiating leverage over rival cable and satellite TV companies that have to purchase access to Comcast-owned programming. Disney, which already owns ESPN and ABC, could also face regulatory scrutiny of its ability to charge high prices for programming.

After AT&T’s court victory allowing it to buy Time Warner last week, Comcast has reason to think that a Comcast/Fox deal would be approved.

Shareholder approval needed

Disney’s new offer consists of $35.7 billion in cash, with the rest in stock. The new agreement was approved by the boards of Disney and Fox but still needs approval from the companies’ shareholders.

Comcast was hoping to have its $65 billion offer accepted at shareholder meetings that were scheduled for July 10. Disney and Fox said they decided to postpone those meetings in order to “prepare updated SEC filings and proxy materials which will be sent to shareholders.” A new date for the shareholder meetings has not yet been announced.

As we’ve previously reported, the sale to either Disney or Comcast would include 21st Century Fox’s film and television studios, cable entertainment networks, the Fox Sports Regional Networks, and international properties including Star in India and Fox’s 39-percent ownership of Sky across Europe.

The sale would also include Fox’s 30-percent stake in Hulu. Comcast already owns 30 percent of Hulu, so this deal would give it majority control of the online video service. Disney also has a 30-percent stake in Hulu, while Time Warner owns 10 percent of the company.

The Fox sale would not include major assets such as the Fox News Channel, Fox Business Network, and Fox Broadcasting Company. Those would be spun off into a new company, and Comcast or Disney would acquire 21st Century Fox after the spinoff.

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