Walt Disney Co. (DIS) - Get Walt Disney Company Report has averted a bidding war with Comcast Corp. (CMCSA) - Get Comcast Corporation Class A Report for a bundle of Twenty-First Century Fox Inc.'s (FOXA) - Get Fox Corporation Class A Report prime assets.
Disney investors seem only modestly relieved, however, as shares gained 0.3% to $107.17 as CNBC reported that the company could cement a deal with Fox by Thursday.
"Well, in a one horse race, its always easier to get to the finish line," said Jeffrey Logsdon of JBL Advisors, suggesting that Comcast may have been more interested in seeing Fox's financials than in lodging a bid.
Comcast stockholders can exhale as the shares rose 2% to $39.20 on news that it would not pursue what was already a long-shot bid because of regulatory risk. Fox climbed 1.2% to $34.06 as the deal, which has been rumored for more than a month, seems close to materializing.
Comcast would have faced a difficult regulatory path. The deal qualifies as both vertical and horizontal consolidation, combining Fox's studios and networks with Comcast's cable TV distribution and NBCUniversal's film and television operations.
The Department of Justice sued to block AT&T Inc.'s (T) - Get AT&T Inc. Report purchase of Time Warner for $108.7 billion, including debt, in November. The government cited concerns about AT&T's market power if it combined its DirecTV and U-verse pay-TV systems Time Warner's media assets.
According to CNBC, Disney offered to pay $60 billion or so for Fox's film studios, the Fox entertainment networks such as FX and National Geographic, Fox's regional sports networks, the Star satellite TV network in India, and stakes in European satellite TV network Sky Plc and streaming partnership Hulu LLC.
The transaction would clean up a few issues for Disney.
Even though Disney bought X-Men and Fantastic Four parent Marvel Entertainment Inc. in 2009 for $4.3 billion, Fox has had the film rights to the franchises because of a pre-existing deal. Disney would own rights to the popular series. Taking control of Fox's Avatar would resolve another anomaly in Disney's intellectual property marketing machine. Disney has an Avatar attraction in its Florida theme park. Buying Fox's Avatar would give it ownership of the IP behind it.
Disney, Fox, Comcast and Time Warner share control of streaming video service Hulu. By acquiring the Fox assets, Disney could hold a majority 60% of the streaming service and could align Hulu with it with its global content strategy.
Moreover, Barclays Capital analyst Kannan Venkateshwar suggested in a recent report, there would be benefits from combining Hulu with Fox's internet satellite TV assets in Europe and India. Together, the services would have 46 million global subscribers to which Disney could sell its forthcoming streaming service. The new direct-to-consumer online offering, set to launch in 2019, would include Star Wars as well as some of the Marvel hits that Fox currently produces. Keep in mind that Disney is pulling its content from Netflix Inc. (NFLX).
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