21st Century Fox Agrees To Higher Offer From Disney
Walt Disney raised its offer of buying 21st Century Fox to $71.3 billion and left the offer of arch rival Comcast far behind. The latest offer made by Disney is far higher than its initial offer. The initial offer was of $52.4 billion and the offer made by Comcast was $65 billion.
According to the officials of Disney, other than the higher offer, the company also has the regulatory advantage over its rival. In a statement released by Fox, it was stated that the offer made Disney is far superior to the proposal of Comcast. However, no response was noted from the spokeswoman of Comcast over the new Disney offer. A battle is going on between Comcast and Disney for the prized media assets like Hulu, Star India, and Sky PLC.
Comcast and Disney were battling from a long time for getting the deal and at the end, Disney got the better of Comcast.
According to a close source, both Disney and Fox were negotiating the earlier agreement over the weekend and the duo was also nailing down the agreement details like stock and cash. The latest made by Disney was on Wednesday before the board meeting of Fox in London, another source close to the situation said.
A meeting between the Fox Chairman Rupert Murdoch and CEO of Disney Bob Iger proved to be the final nail in the coffin as the two high profilers met to discuss the project. It was later reported that Disney officials agreed to pay 50% in stock and 50% in cash to the shareholders of Fox. If the deal closes right now, the Fox shareholders ould own 19% shares of the combined company as compared to the 25% shares according to the older deal.
The shareholders of 21st Century Fox will earn $38 per share according to the Disney deal.
According to some experts, Disney and Comcast should divide the Fox assets between themselves rather in indulging themselves in a bidding war. But Iger had other plans as he said there is no use of splitting the business and it will prove to be a non-starter.
The time is also on Disney as Bob said that the agreement between Disney and Fox has seen several months of review. The CEO further said that their company has done well in terms of getting the deal and the time of the deal as compared to their rivals. The CEO also talked about how the programming tool of Fox will help Disney to launch a streaming service of its own which will challenge Netflix.
A meeting between the Fox Chairman Rupert Murdoch and CEO of Disney Bob Iger which helped the deal too.
However, the deal does not include channels like Fox Sports 1, and Fox News or the related television stations. And in either case, these stations would be spun off to a new company. According to the stats of last day before the deal, it was reported that Disney will pay Fox $38 per share as compared to the offer of Comcast of $35 and the original offer of Disney offered Fox $29.54 per share.
On the deal day, the values of Fox A shares increased by 7.5% and the value of per share rose to $48.08. However, the Disney shareholders didn’t mind the increment in the per share value of Fox assets as the stock market rose 1%.
According to some analyst, the move by Disney was foolish. While commenting on the deal, the Cowen & Co analyst Doug Creutz said that the price at which the deal is made is not looking good to the shareholders and they wanted to see it happening in less amount.
The bidding war between Comcast and Disney may unbalance their balance sheets as the Christine McCarthy, the chief financial officer of Disney said that company may not be able to achieve the repurchase target of $20 billion which was announced in December. Before signing the deal with Disney, Fox shareholders had to take into account many factors. After the deal, Disney announced that the deal will be tax-free to the shareholders.
The inclusion of cash in the deal by Disney means that spinoff of other Fox services will not be tax-free for its shareholders as it used to be in previous stock deals. Due to Disney offer, Fox has also postponed the meeting of its shareholders which was scheduled on July 10.
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