Massive increase in Disney offer for Fox assets

The Disney v Comcast battle for 21st Century Fox continues as Disney puts a new $71.3 billion offer on the table.

Walt Disney Co has finally made its next move in the bidding war with media conglomerate Comcast. Disney has now upped its offer for 21st Century Fox’s movie studio, cable channels and vital IPs by nearly $20 billion to $71.3 billion. It’s a significant increase on Comcast’s rival offer.

The new bid has shifted from Disney’s original all-stock deal to one with nearly $36 billion in cash. It came hard on the heels of Comcast’s $65 billion proposal for Fox’s assets.

It was no surprise that Disney upped its offer – the company had made it clear it didn’t want to lose the Fox assets. However investors were stunned at the scale of its counter-offer. Fox shares rose more than seven per cent on hearing the news, trading to $47.89, a record high.

Disney chief executive Robert Iger had originally reached a deal for $52.4 billion with Rupert Murdoch back in December. The new deal includes nearly $14 billion of outstanding Fox debt making its overall value $85.1 billion. It would be one of the largest media takeovers on record.

Iger says the new price is worth paying. “After six months of integration planning we’re even more enthusiastic and confident in the strategic fit of the assets and the talent at Fox,” he said.

However this may not be the end of this long-running saga. The FT reports that Brian Roberts, chief executive of Comcast, has said privately the company is getting ready to raise its own bid. It’s thought that Comcast has reached out to Bank of America and Wells Fargo to investigate how to raise more cash without losing its investment-grade credit rating.

However credit ratings agency Moody’s warns it could downgrade Comcast. It’s estimated that the cable group would have debts of roughly $170 billion, were it to be successful in its bid for Fox. It would become second-most indebted company in the world.

The Fox acquisitions would help Disney consolidate its position against streaming rivals such as Amazon and Netflix.

The potential Disney-Fox deal would combine the company behind Avatar, X-Men and The Simpsons with Mickey Mouse, Iron Man and Han Solo. It would create a formidable intellectual property powerhouse.

“We are extremely proud of the businesses we have built at 21st Century Fox, and firmly believe that this combination with Disney will unlock even more value for shareholders as the new Disney continues to set the pace at a dynamic time for our industry,” said Rupert Murdoch, executive chairman of Fox.

Christine McCarthy, chief financial officer for Disney, said the company would fund part of the $71.3 billion takeover with debt, thus increasing its leverage. However, she warned, the higher debt levels would mean Disney would no longer expect to buy back shares (with a value of up to $20 billion) which was part of its original deal with Fox.

If Disney wins, it stands in a good position to take complete control of Sky (Fox owns a 39 percent stake in the pan-European media group). Sky itself is also engaged in a separate takeover battle in which Comcast has recently submitted an offer that valued it at more than £22 billion. Fox’s rival offer for Sky values the group at about £18.5 billion.