Disney is reportedly planning to add cash to its all-stock bid to purchase the bulk of 21st Century Fox's movie and TV assets. This is merely the latest twist in the bidding war between Disney and Comcast, with Fox shareholders making a crucial vote early next month.
In December of last year, Disney finalized a $52.4 billion all-stock offer to purchase 20th Century Fox and various other movie and TV divisions of 21st Century Fox. Since then, the shares have gained over $3 billion in value, meaning the offer is currently worth about $55.5 billion. But Comcast has responded with an unsolicited all-cash bid of $65 billion to buy the same assets. Industry analysts are expecting the two companies to eventually divide the spoils between them, with Comcast taking Sky, and Disney gaining the rest, but that may not be the case.
According to CNBC, 21st Century Fox's board meets on Wednesday to discuss Comcast's bid. Should the board decide to open talks with Comcast, Disney is reportedly preparing to boost its bid with an unspecified amount of cash. Disney may actually be in a more vulnerable position than anyone expected, with Pivotal Research Group downgrading Disney shares to "sell." In a statement, analyst Brian Wieser noted:
"The stock's recent run-up fails to reflect that a higher price paid for Fox's Entertainment assets would reduce the value of Disney to its shareholders. Alternately, the absence of completion of the transaction would also be negative for Disney as it would mean the company would be unable to realize the synergies it expects to produce from the transaction."
Comcast's unsolicited bid came only a day after U.S. courts approved the AT&T/Time Warner merger. Fox executives had initially favored Disney because they believed that particular deal posed fewer antitrust issues. But Comcast has taken the AT&T/Time Warner decision as a green light to make another attempt, offering cash in the hopes of tempting the shareholders. On Wednesday, it should be revealed whether or not Fox's board decides to pursue further talks with Comcast. If they do, then Disney should have a swift response of their own. The Mouse House is, no doubt, in a strong position to add cash to their bid. In late May, there were reports Disney was "prepared to offer significant cash" as part of a reworked deal if Fox demanded it.
Pivotal Research Group's statement will add a degree of pressure to the whole transaction, though. The danger is that Disney could potentially find itself in a no-win scenario, where the deal became too expensive. At the same time, though, the Fox purchase is key to Disney's future plans. Disney would gain powerful, marketable franchises such as Avatar, The Simpsons, and Planet of the Apes, not to mention the rest of Fox's extensive archive of films and TV shows, which would add tremendous value to the Disney streaming service that's planned to launch next year.