In the end, there may not be a deal. The Murdochs may decide not to sell.
But as Comcast Corp. (CMCSA) and Walt Disney Co. (DIS) have shown by entering into deal talks with Twenty-First Century Fox Inc. (FOXA) , there is strong interest in what Rupert Murdoch, and more recently, his sons James and Lachlan, have built over many decades, according to sources familiar with the companies.
Much of Comcast's attention, sources said, is focused on Fox's international business. International media businesses are growing much faster than those in the U.S., and unlike Disney, Comcast has a comparatively global presence despite expanding its operations in China in recent years.
The elder Murdoch, of course, began his media buying in the 1950s in his native Australia before moving to the U.K. and Europe, and then the U.S., where he famously, and ambitiously, created a fourth broadcast network. But the parts of the Fox empire in which Comcast has shown interest include its distribution network for films and TV shows in countries around the world, the Star India networks and a 39% stake in European satellite TV operator Sky plc.
Were Fox to sell, and that remains uncertain, Comcast also is interested in acquiring its enormous TV studio, home to everything from "Homeland" to "The Americans," along with its 20th Century Fox film studio and the edgier Fox Searchlight.
Like Disney, Comcast covets Fox's Star India. Both enormous and growing, India is a market that requires years of investment to break into. The same can be said for Europe, where Sky has operations in cities and towns throughout Germany, Italy, the U.K. and Ireland.
Fox's international assets would comprise about 70% of the operating income of the businesses Comcast might buy if a deal were actually struck and U.S. antitrust regulators approved the transaction.
But will a deal really materialize? Do the Murdochs really want to carve up their multinational media conglomerate? And would U.S. regulators ever sign off on a deal that would combine huge parts of U.S. media and entertainment businesses?
Fox and Comcast declined to comment. Disney could not be reached for immediate comment. But Wells Fargo Securities LLC media analyst Marci Ryvicker was unequivocal.
"We just don't believe it. Period," she wrote in a Nov. 16 investor note.
"We view the likelihood of any real deal being consummated as being exceedingly low, especially given the regulatory scrutiny over the pending AT&T-Time Warner deal," Ryvicker said. "Further, we believe Comcast would have an exceptionally difficult time completing this merger, as it would be both vertical and horizontal (AT&T-Time Warner is only vertical in nature which is typically LESS scrutinized)."
Already, President Trump's antitrust chief at the Department of Justice, Makan Delrahim, has made clear with comments about AT&T Inc. (T) and Time Warner Inc. (TWX) that the administration is taking a harder-than-expected look at media industry mergers. But antitrust issues aside, does a Fox-Comcast deal make sense financially? Might Fox's assets be worth more in the future as part of 21st Century Fox?
At the root of the Murdochs' discussions with Comcast executives and, previously, Disney is the widespread view that scale in content production and distribution is essential given the ascendancy of Netflix Inc. (NFLX) and recent moves by Amazon.com Inc. (AMZN) and Apple Inc. (AAPL) to enter the media business. Disney, the world's largest entertainment company, already has laid plans to launch two direct-to-consumer streaming services over the next two years: one featuring ESPN and a second featuring its Pixar, Lucasfilm, Marvel and Disney brands.
Were the Murdochs to sell to Comcast, they stand to retain the Fox News Channel, the Fox broadcast network, its local TV station group and many of the company's regional sports networks. It's conceivable that were such a deal to take place, the Murdochs would partner with Sony Corp. (SNE) , the only major Hollywood studio without networks and home to a bevy of former Fox executives including Mike Hopkins, who left Hulu LLC last month.
Sony and Verizon declined comment.
If anything, Fox's willingness to listen to suitors has lifted the company's stock price. Fox shares on Friday afternoon were up 3.8% to $30.43, its price-to-earnings ratio having jumped to 15.8 times from 13 times just 10 days ago. If it's a higher valuation that the Murdochs have been seeking, they seem to be getting it.