Walt Disney Co. raised its offer to purchase most of 21st Century Fox FOX 1.87% to more than $71.3 billion in cash and stock, topping an unsolicited offer from rival Comcast Corp. and escalating the bidding war for the coveted media properties. Disney’s DIS 0.59% new offer is far higher than its original deal, $52.4 billion in stock, and surpasses Comcast’s all-cash offer of roughly $65 billion. In addition to having the higher offer, Disney DIS 0.59% said it also has a regulatory advantage over Comcast in winning a company to help it fight back against new-media competitors like Netflix Inc. Fox, in a news release, said the new Disney DIS 0.59% deal “is superior to the proposal” made by Comcast earlier this month. A Comcast spokeswoman had no immediate comment. From AT&T and Time Warner to the hot pursuit of 21st Century Fox and Sky, media mergers are in full swing. Why now? WSJ's Amol Sharma answers all your questions about the forces driving media deals. Photo: Getty Images Disney and Comcast are battling for prized media assets including the Twentieth Century Fox film and TV studio; U.S. cable networks FX and regional sports channels; international assets such as Sky PLC and Star India; and Fox’s one-third stake in the streaming service Hulu. Fox and Disney were negotiating terms of an amended agreement over the weekend and had the outlines of a deal by Tuesday, though they were nailing down details like the mix of cash and stock, a person close to the situation said. Disney submitted its bid Wednesday ahead of a Fox board meeting in London, another person familiar with the situation said. Fox Executive Chairman Rupert Murdoch and Disney Chief Executive Bob Iger met to discuss the new pact. Disney agreed to pay Fox shareholders roughly 50% in cash and 50% in stock. If the current deal closes, Fox shareholders would own 19% of the combined company, compared with 25% under the old deal. Some observers have said it might make sense for Disney and Comcast to divide the Fox assets between themselves rather than go through a bidding war, but Mr. Iger said the idea of splitting the businesses is a nonstarter. “We have an agreement in place with [Fox] that precludes that,” he said on a conference call Wednesday. Disney also has time on its side, Mr. Iger said, because its deal with Fox has been through several months of regulatory review. “We believe that we have a much better opportunity, both in terms of approval and the timing of that approval, than Comcast does,” he said. The CEO also highlighted how Fox’s programming would boost his company’s efforts to launch a Disney-branded streaming service next year and compete directly with Netflix. “Direct-to-consumer distribution has become an even more compelling proposition in the six months since we announced the deal. The consumer is voting—loudly,” he said. The fight for Fox is part of a scramble by media, telecom and cable companies to get bigger as technology-industry superpowers disrupt old ways of doing business. Neither proposed deal includes Fox News, Fox Sports 1, the Fox broadcast network or its television stations. In either scenario, those assets would be spun off into a new company, for the moment dubbed “New Fox.” On a per-share basis, the new Disney deal values the Fox assets being acquired at $38 a share, compared with Comcast’s offer of $35 and Disney’s original offer of $29.54, based on the last trading day before it was announced. On Wednesday, Fox’s Class A shares rose 7.5% to $48.08, and Comcast shares added 1.8% to $33.39. At a Glance How Disney’s latest offer compares with its earlier bid and Comcast’s offer. PRICE: Disney’s latest offer: $71.3 billion in cash and stock, values Fox’s assets at $38 a share. Disney’s initial offer: $52.4 billion in stock, or $28 a share. Comcast’s offer: $65 billion in cash, or $35 a share Disney’s latest offer: $71.3 billion in cash and stock, values Fox’s assets at $38 a share. Disney’s initial offer: $52.4 billion in stock, or $28 a share. Comcast’s offer: $65 billion in cash, or $35 a share MIX: Disney’s latest offer would include about $35.7 billion in cash and 343 million shares, worth $36.39 billion at Tuesday’s close. Disney’s latest offer would include about $35.7 billion in cash and 343 million shares, worth $36.39 billion at Tuesday’s close. ASSETS: Sale includes the Twentieth Century Fox film and TV studio; U.S. cable networks, including FX and regional sports channels; international assets, including Sky PLC and Star India; and Fox’s one-third stake in the streaming service Hulu. Sale includes the Twentieth Century Fox film and TV studio; U.S. cable networks, including FX and regional sports channels; international assets, including Sky PLC and Star India; and Fox’s one-third stake in the streaming service Hulu. STAKE: Fox shareholders would get roughly a 19% stake in Disney Fox shareholders would get roughly a 19% stake in Disney DEBT: Disney would assume about $13.8 billion of debt from Fox Disney would assume about $13.8 billion of debt from Fox VOTE: A new date will be set given the new offer. Fox and Disney originally scheduled a vote for July 10. A new date will be set given the new offer. Fox and Disney originally scheduled a vote for July 10. SPECIAL DISNEY TERMS: Disney’s latest offer includes a collar, aimed at maintaining the $38 a share value despite potential stock fluctuations. Adjustments will be made to the offer if Disney’s stock goes outside the collar of $93.53 and $114.32. Disney shares have closed within that range since May 2017. Disney’s latest offer includes a collar, aimed at maintaining the $38 a share value despite potential stock fluctuations. Adjustments will be made to the offer if Disney’s stock goes outside the collar of $93.53 and $114.32. Disney shares have closed within that range since May 2017. SHARES: In afternoon trading, Fox’s shares rose 7.6% to $48.10, Disney shares increased 1.1% to $107.31, and Comcast shares added 1.9% to $33.43. --Austen Hufford Disney shareholders didn’t appear to mind stomaching the higher price as the stock rose 1% to $107.15. Some analysts said the move was foolish. “We didn’t like the deal at the prior price, and we like it substantially less now,” said Doug Creutz of Cowen & Co. The analyst said a Disney-Fox tie-up isn’t the way to win the direct-to-consumer fight. A continuing bidding war between Disney and Comcast could be a strain on both companies’ balance sheets. Disney Chief Financial Officer Christine McCarthy said the company no longer expects to complete a $20 billion share repurchase announced with the initial deal in December. Moody’s placed Disney on review for a credit-rating downgrade on Wednesday, citing its discomfort with how long it would take Disney to return to investment-grade leverage. S&P Global Ratings said it could lower its ratings on Disney by up to three notches depending on the final deal. Fox’s board and shareholders have had to weigh a number of factors as they measure the offers, including their structure. More stock in the deal has tax advantages for Fox shareholders. These tax advantages might be particularly large for Fox shareholders, such as the Murdoch family, who have held Fox’s stock for a long time and thus face a potentially large capital gain to pay taxes on if it is sold for cash. Mr. Murdoch and his family have a 17% economic interest in 21st Century Fox. 21st Century Fox and Wall Street Journal-parent News Corp share common ownership. Disney said the stock portion of the deal is expected to be tax-free to 21st Century Fox shareholders. Other shareholders, particularly the large institutional shareholders that are Fox’s biggest investors, may care less about taxes. Disney’s introduction of cash into its latest bid would mean that the spinoff of New Fox was no longer tax-free to shareholders, as it had been in its previous all-stock deal, according to independent tax analyst Robert Willens.<doc-sep>Disney has boosted its offer for 21st Century Fox to more than $71bn in a bid to knock rival Comcast out of the battle to buy the bulk of Rupert Murdoch’s entertainment empire. Disney has upped its offer to $71.3bn (£54bn) – from $52.4bn – trumping Comcast’s $65bn all-cash hostile offer tabled last week. Disney has also moved from its original tactic of an all-stock deal for Fox, owner of assets including X-Men film studio 20th Century Fox, and a 39% stake in Sky, to a 50/50 mix of cash and shares. Fox, which backed Disney’s original bid, said that in light of the new offer Comcast’s bid cannot be considered to result in a better deal for shareholders. “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,” Murdoch, the executive chairman of Fox, said. “We remain convinced that the combination of Fox’s iconic assets, brands and franchises with Disney’s will create one of the greatest, most innovative companies in the world.” Disney said it expects to pay a total of about $35.7bn in cash and issue 343m new shares to Fox shareholders, representing about a 19% stake in Disney. “The acquisition of 21st Century Fox will bring significant financial value to the shareholders of both companies and 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,” Bob Iger, the chief executive of Disney, said. Comcast, the US cable operator and media group, is not expected to go away, however. It has also lodged a separate £22bn bid to buy all of Sky, and under chief executive Brian Roberts it is expected to respond with an improved offer as a bidding war hots up over the summer. Fox said the company directors remain open to “evaluating a competing proposal”. Fox’s share price closed 7.5% higher at $48.08, indicating that investors believed a bigger bid from Comcast was likely. Murdoch has faced shareholder pressure over his preference for Disney’s original deal, which was 19% lower than Comcast’s offer. One analyst said bidding for the Fox assets could rise to between $75bn and $80bn. “Above $80bn would be a tough pill to swallow for Disney shareholders given the steep price,” said Dan Ives, analyst at market research firm GBH Insights. “That said, this poker game appears to be just getting started and now it’s Comcast and [Comcast CEO Brian] Roberts move to show their next hand.” Christopher Hohn, the activist investor behind hedge fund TCI, last month wrote a letter to the Fox board pointing out that Murdoch has a potential conflict of interest as capital gains tax issues could lead him to preferring a lower priced stock offer from Disney over the cash deal from Comcast. Guardian business email sign-up Disney has sought to address that issue, sweetening its offer while giving Fox shareholders the choice between taking cash or stock. Culture secretary Matt Hancock is set to clear Rupert Murdoch’s £11.7bn bid to take over the 61% of Sky that he does not own, with conditions that include selling off Sky News to reduce his power over UK news media. However, if Murdoch wants to raise his bid for Skyin order to compete with Comcast, he must get the green light for an increased bid from Disney. On a call with analysts on Wednesday, Disney’s Iger refused to say where he stands on the progress of Fox’s bid for Sky. “I don’t have update on Sky,” he said. “Fox is in the driver seat ... You’ve seen the regulatory [developments]. I won’t say more than that.”<doc-sep>Way back in 2004, before Luke Skywalker, Iron Man, and many characters played by Samuel L. Jackson were the professional colleagues of Mickey Mouse, Comcast attempted a hostile takeover of Disney. The notion seemed brash at the time — what business did a Philadelphia-based cable company have owning one of Hollywood’s biggest media powerhouses? Though the deal was rejected, it foreshadowed two important developments: telecommunications and media giants were destined to become one and the same, and Disney and Comcast would have a long-lasting beef. We’re seeing both dynamics play out in the extensive attempts by each firm to scoop up 21st Century Fox. On Wednesday, Disney announced that it was upping its bid for 21st Century Fox to $71.3 billion in order to land such properties as the 20th Century Fox movie studio, the cable network FX, and Fox’s 30 percent stake in the streaming service Hulu (Fox News, the Fox broadcast network, and Fox Sports 1 are not part of the deal). Disney had already agreed to pay $52.4 billion for Fox in December, but earlier this month Comcast swooped in with a $65 billion offer. Comcast has not yet said whether it will counter Disney’s new offer, but Fox has delayed a July 10 shareholder vote on the Disney deal just in case. According to Variety, the final price tag could be as high as $80 billion. The bidding war is a frustrating turn for Disney CEO Bob Iger, who was positioning the Fox pickup as the crown jewel in a run of savvy media acquisitions that has included Pixar, Marvel, and Lucasfilm. Over the past decade, Disney has bet big on iconic pop culture properties, turning the cineplex into a sea of sequels and spinoffs. But the company’s footing is less sure on the small screen, where ESPN is bleeding subscribers and Netflix has effectively become half a dozen cable networks in one. Fox would help bolster Disney’s catalog for its planned streaming service in 2019 while simultaneously allowing it to sap Netflix of more content when the two companies’ licensing deal ends next year. Comcast’s calculus is slightly different. Despite owning NBCUniversal, the company’s biggest revenue source remains cable subscriptions in an era when Netflix has made paying for traditional television seem archaic. Fox would provide some much-needed diversification to Comcast’s financial statement, especially abroad. Fox’s stake in the British pay-TV giant Sky and its other international assets would triple Comcast’s foreign revenue. CEO Brian Roberts has been trying to get away from his company’s cable roots since at least the botched Disney merger in 2004; Fox would finally provide true escape velocity. Though both Disney and Comcast were vying for Fox behind closed doors last year, for a few months it seemed like Disney might win out simply based on legal precedent. The Justice Department’s antitrust suit to block the merger of AT&T and Time Warner made it tough to imagine that a similar tie-up between a telecom giant and a media company would pass the DOJ’s smell test. But a federal judge ruled in favor of the corporations, allowing for the merger and implicitly declaring open season on media acquisitions. With legal roadblocks now unlikely, the fate of Fox will come down to which CEO can stomach a higher price tag. That the cost of Fox has already shot up $20 billion says a lot about how threatened Hollywood’s gatekeepers feel by the tech companies angling to take over television. The companies may fear Netflix for different reasons — Disney because the streaming service has become a juggernaut in Hollywood production, Comcast because its successful shows are convincing people to dump cable. But they’re both going to be forced to pay a premium to fight back.<doc-sep>
The bidding war between Disney and Comcast is heating up. Disney announced on Wednesday a new agreement to acquire entertainment assets from 21st Century Fox, upping its offer to $71.3 billion. Disney's bid comes over the top of Comcast, which offered $65 billion just a week ago for the pieces that Fox is looking to sell, which include its movie and TV production businesses, cable TV channels including FX and National Geographic, and two major international TV distributors, Sky in Europe and Star in India. In December, Disney stepped up with an offer worth $52 billion in stock, which is viewed as a way to avoid a large tax charge. Fox's broadcast network and Fox News, among other pieces of 21st Century Fox, would not be part of the deal. The fresh bid adds to the ongoing narrative in the media world that bigger is better. AT&T recently completed its $85.4 billion acquisition of Time Warner, creating the newest content-and-distribution media hybrid. Robert Iger, CEO of The Walt Disney Company, said in a statement that the company wants Fox's assets to help it expand globally and create direct-to-consumer services, which newer entrants Netflix and Amazon already offer. “At a time of dynamic change in the entertainment industry, the combination of Disney’s and Fox’s unparalleled collection of businesses and franchises will allow us to create more appealing high-quality content, expand our direct-to-consumer offerings and international presence, and deliver more personalized and compelling entertainment experiences to meet growing consumer demand around the world," Iger said. Disney had previously made its bid in the form of Disney stock, while Comcast had offered cash. Disney's newest offer allows Fox shareholders to choose stock or cash, a move that could help convince Fox shareholders to favor its bid — and help avoid potential problems around media ownership regulations. Comcast declined to comment. Comcast is the owner of NBCUniversal, the parent company of NBC News. The new Disney bid is the fourth offer on the table. Fox executive chairman Rupert Murdoch was initially approached by Comcast CEO Brian Roberts late last year, though that bid, of unknown size, was rejected. The bidding war highlights the urgency with which Comcast and Disney are trying to add to their content libraries and expand their international reach. Both companies would benefit from Fox's content and distribution assets, each of which are seen by media analysts as necessary to compete for consumers who are turning away from traditional media channels in favor of the on-demand offerings of tech companies. "In a nutshell, if Comcast won these assets from the arms of Disney it would be a devastating and hard to recover blow to [CEO Bob Iger] and Disney's streaming ambitions going forward, which speaks to Disney's very aggressive bid today," wrote Daniel Ives, head of technology research at GBH Insights, in an investor note. While Comcast already has a direct relationship with viewers through its cable and internet systems, Disney has little insight into who is watching its shows and how to best monetize those habits. Disney is working on its own direct-to-consumer service with the help of streaming video platform Bamtech, which it acquired in August 2017. Disney has said its own Netflix-style service is set to launch in 2019. The U.S. Justice Department has already been examining the initial Disney-Fox deal and is asking the market for their comments as part of a second round of questioning to help it understand the impact of the combination, according to a source close to the investigation who was not authorized to speak publicly on the matter. The Justice Department declined to comment. The Disney press release mentioned it had made adjustments to its agreement to make it more friendly to regulators, though it did not say what those were. Concentrated ownership of regional sports networks (RSNs) is thought to have been a potential concern for a prospective buyer. Comcast already owns RSNs, while Disney has a major place in national sports with ESPN. The Murdoch family must be careful that any new Disney shares they receive do not give them more than 5 percent ownership of the company, as anything larger would trigger an action by the Federal Communications Commission, which limits ownership of broadcast networks. 21st Century Fox owns the Fox broadcast network, while Disney owns ABC network. Under Disney's earlier deal, the Murdoch family would have gained around 4 percent of Disney.