Comcast vs. Disney: Expect a Grudge Match Bidding War for Fox Media

In this segment from the Motley Fool Money, host Chris Hill and senior Motley Fool analysts Jason Moser, Jeff Fischer, and Aaron Bush discuss what’s next in the sell-off of Twenty-First Century Fox’s(NASDAQ:FOX) (NASDAQ:FOXA) media assets. One way or another, Fox is going to be turning a big piece of its empire into an 11-figure cash infusion.

Disney’s(NYSE:DIS) $52 billion cash and stock offer has not been knocked back by Comcast’s(NASDAQ:CMCSA) bid of $65 billion in cash. But these two suitors have a history, and that may color how they proceed — regardless of which is in a better position to get the most out of the Fox properties.

A full transcript follows the video.

This video was recorded on June 15, 2018.

Chris Hill: You mentioned the bid for Twenty-First Century Fox’s assets. Let’s go to that, because there was news this week, Jason. This was something we were expecting. It’s nice to see that it actually came to fruition. That is Comcast coming in with a bid of $65 billion in cash. This is about 20% higher than the $52 billion that Disney had offered in cash and stock. Where do you think this is going?

Jason Moser: I mean, I think it’s going to a bidding war, ultimately. At least, the rumors are that Disney is working on a package to outbid Comcast there, and looking for a deal here. Really, the going sentiment for this acquisition is that it’s all in the name of Netflix and competing with Netflix. I think that’s it, to a degree. Certainly, Netflix is the company that has changed the space, so to speak, and taken us into this over the top and personalized and on-demand world. They’re not the only ones that can do it.

I think, this deal becomes far more interesting now that net neutrality has been overturned. Why would Disney worry about even getting caught up in a bidding war with this? I think it’s because their perspective is — and they have some experience to go on here — that the IP is worth more than the pipes. I think it’s reasonable to assume that somewhere down the road, with a new administration, net neutrality goes back to where it was before. I could see that being reimplemented. If that is the case, those pipes become a little bit less valuable. But that IP is going to be very valuable for a very long period of time.

So, I could see Disney putting up another offer here. They have the balance sheet to do it. They have a better balance sheet than Comcast. Both companies are about the same size. I think they can go in there and use stock as a currency, if they want to. I suspect we’ll see some more back and forth with this.

Aaron Bush: It’s interesting to me, the different ways that Disney and Comcast would approach Fox. Disney, on one hand, it would be much more of a horizontal integration, in terms of, it’s just buying more of what it already does — more content, more channels, greater access to more people. Comcast is pursuing more of a vertical integration, more similar to the AT&T-Time Warner deal, which is very different, in terms of the type of value that you would take out of the business.

Personally, I hope that Disney is the one that does get access to Fox. But, I fear that this is also just Comcast pushing up the price so that Disney might have to pay even more for those assets, which makes it a lose for whoever buys it.

Moser: That’s distinctly possible. You also have to at least consider — money talks, at the end of the day. But, you wonder, the Murdoch family, would they rather be a part of the Disney family or a part of the Comcast family, even if they have to concede a little bit on the dollar front? I mean, when we look at the feelings that these two companies elicit, they’re on polar ends of the Earth, right? I mean, Comcast brings out the worst in everybody, and Disney seems to bring out the best. There’s the warm fuzzy of Disney, and then the Twitter trolls of Comcast. So, I feel like they probably want to be a part of that Disney family. I don’t know how much that weighs into it.

Hill: You know who doesn’t have a warm, fuzzy feeling for Disney? Brian Roberts at Comcast. They tried to buy Disney back in 2004, that failed. A few years ago, they were trying to buy Time Warner Cable, and Disney was part of the group that helped to block that. They may be trying to drive up the price, or they may be saying, “No, no. We’re going to win this time.”

Bush: This just a grudge?

Hill: A grudge with a business purpose.

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