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Comcast makes $65 billion offer to steal 21st Century Fox away from Disney

After weeks of signaling it would do so, Comcast is making a play at 21st Century Fox’s TV and film assets. Hoping to derail Disney’s pending, stock-based $52.4 billion deal with Fox, Comcast is stepping in with a higher, all-cash offer for $35 per share, which totals approximately $65 billion. The move is likely to trigger an intense battle between Comcast and Disney as 21st Century Fox and the Murdoch empire weigh which is the better option. Fox’s board of directors is scheduled to vote on the Disney deal on July 10th.

“Time is of the essence for your consideration of our proposal,” Comcast CEO Brian Roberts wrote in a letter to Fox’s board. Comcast has filed a statement with the SEC in opposition to the Disney/21st Century Fox merger. On Wednesday evening, Fox said “21st Century Fox’s board, in consultation with its outside legal counsel and financial advisors, will carefully review and consider the Comcast proposal.” It hasn’t yet made a decision on whether it will postpone the July 10th meeting.

Comcast had reportedly been waiting to see whether AT&T’s acquisition of Time Warner would be approved — despite a high-profile attempt by the Justice Department to block it over antitrust concerns — before formally making its offer for the bulk of 21st Century Fox’s entertainment assets. A judge ruled in AT&T’s favor on June 12th without requiring it or Time Warner to divest any of their holdings. That certainly had to have made Comcast’s executives and legal team feel much better about their prospects of success. Comcast CEO Brian Roberts was reportedly tuned into CNBC at the company’s headquarters to see the outcome live, according to The New York Times.

Comcast says it is “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.” Comcast is “open to working with antitrust authorities” to change the structure of the deal in order to gain approval, according to a slide deck the company provided about its proposal.

Comcast’s bid is for the movie studio 20th Century Fox, 20th Century Fox Television, Fox-owned cable networks (including FX and National Geographic), several regional sports TV networks, and the company’s stakes in international networks Sky and Star TV. It also includes a 30 percent stake in the Hulu streaming service. Just like the Disney deal, Comcast would become a majority owner of Hulu if its proposed acquisition is approved. There will undoubtedly be concerns about one of America’s leading ISPs owning — and potentially prioritizing — services built around that vast collection of content.

Fox Broadcasting, Fox News, and Fox Sports are not part of the agreement, and the plan under the Disney deal is for them to be spun off into a company called New Fox. That will also occur if Comcast wins over Fox’s board and becomes the leading suitor. To get in that favorable spot, Comcast is offering the same $2.5 billion reverse breakup fee as Disney in the event that the deal is scuttled by regulators. But it’s going a step further and offering to cover the $1.525 billion that Fox would owe Disney if it decides to abandon their deal.

Roberts and Rupert Murdoch held discussions during the same period that Disney negotiated its offer with 21st Century Fox; Fox’s board chose the Disney path in part because it seemed like a safer bet versus a Comcast bid that could run into hurdles with regulators. AT&T’s victory might lessen that risk in the eyes of Murdoch. Comcast, which already made a colossal deal to acquire NBCUniversal in 2011, would leverage 21st Century Fox’s media businesses and vault of content in a similar manner: they’re hugely valuable resources in Comcast’s competition with Netflix, Amazon Video, and other streaming services that have invested heavily in originally programming.

The letter that Brian Roberts sent to Fox’s board making the bid official follows below:

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.

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

Disclosure: Comcast is an investor in Vox Media, The Verge’s parent company.


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