Big Red Car here on a lovely, young Saturday morning waiting for the A/C guy and the plumber, which, of course, brings me to the issue of the Twentieth Century Fox feeding frenzy.
For those keeping score at home, Twentieth Century Fox is being pursued by a couple of companies to acquire it. Right now, Mickey Mouse is the anointed winner.
The potential acquirers were: The Disney Company and Comcast.
As I said, right now, Mickey is in the lead, but Fox can receive and consider new bids and new bidders.
Who is this Twentieth Century Fox, Big Red Car?
Twentieth Century Fox is Rupert Murdoch’s deal. He and his family own 17% of the enterprise through various types of stock.
The assets on the chopping block include: Twentieth Century Fox, some regional sports channels, Fox Searchlight Pictures, FX Productions (Avatar, X-Men, Fantastic Four, original Star Wars), National Geographic Partners, Sky in the United Kingdom, Star in India, and a 30% stake in Hulu. These are generally considered to be the “film and television” assets of Twentieth Century Fox.
[Disney and Comcast both own similar 30% stakes in Hulu, so the winner ends up with 60% ownership and majority control. Not a small consideration.]
Assets excluded: Fox News Channel, Fox Business Network, Fox Sports 1, television stations plus some others. The remaining assets will continue to operate as “New Fox” channel.
History of the Fox bids
So, dear reader, herein lies a story of the power of competition. Here’s what has happened thus far.
1. In December 2017, Walt Disney Company offered to acquire a slice of Fox for $52.4B (billion) in an all-stock deal. This was a cozy deal negotiated between Rupert Murdoch and Bob Igor, CEO of Disney.
Fox announced there was a “definitive agreement” between the buyer and seller, but it did not prohibit other offers.
Fox and Disney began to work on regulatory issues which turns out to be very significant as they are now six months into the process, and have gotten to know each other well.
2. Thereafter, enter Comcast, who made an unsolicited all-cash offer of $65B. So, of course, we had a bidding war on our hands.
The Comcast offer is a 19% premium over the Mickey Mouse offer. They also offered to pay the $1.5B breakup fee associated with the Disney offer.
3. Mickey did not like that and made a $71.3B half-cash, half-stock offer after Fox received the Comcast offer. [Note: There are huge tax implications in a cash or part cash deal. A stock deal can be structured to be tax irrelevant if done correctly but folks like cash, particularly non-taxpaying institutional investors.]
You can do the math; that is a $6.3B better offer, about 10%.
Rupert Murdoch, Chairman of Twentieth Century Fox said, “We remain convinced that the combination of Twenty Century Fox’s iconic assets, brands and franchises with Disney’s will create one of the greatest, most innovative companies in the world.” This is the kind of thing people will say when you wave $71.3B under their nose.
However, Fox retained the right to receive and consider competing bids. Haha. That old fox, Rupert. Stop for a second – Old Fox Rupert, by being in the right place at the right time, set off a fight which is going to line his pockets with even more money.
There is a bit of a pissing contest between two powerful CEOs: Bob Igor at Disney, and Brian Roberts at Comcast. Neither one is used to failing to get their way.
What also colors this transaction was the AT&T/Time Warner ($85B deal) decision in which the transaction was allowed to go forward, signaling that big media transactions (including ISPs and media companies) will not be held up by anti-trust considerations.
Did we learn something here, Big Red Car?
Yes, dear reader, we learned an excellent lesson on the power of competition and the unleashing of the nuclear power of an open auction even when held between two incredibly powerful companies and CEOs.
Somebody is going home as Miss Congeniality and somebody is going home with the prom queen. Disney’s starting bid of $52.4B, all-stock, ended up at $71.3B, half-stock/cash, showing you that the prom queen has expensive tastes.
In all business endeavors, harness the power of the marketplace; create an auction; and let the power of competition find you the best price. Be on Rupert Murdoch’s side of the feeding trough.