Comcast Tops Fox’s Bid for Sky as British Government Greenlights Murdoch’s Offer

NEWS ANALYSIS — As expected, Comcast Corp. increased its all-cash offer for British satellite TV operator Sky to $34 billion (£26 billion), or £14.75 per share, exceeding 21st Century Fox’s revised offer of £14 per share. Fox, which is controlled by Rupert Murdoch, currently owns 39% of Sky.

This came the day before the British government — after months of regulatory review — formally cleared Fox’s pursuit for remaining interest in Sky.

“It’s now a matter for Sky shareholders to decide whether to accept 21stCentury Fox’s bid,” Jeremy Wright, U.K. cultural and media secretary, said in a July 12 statement.

Which could be meaningless considering the third player (Disney) in this high-stakes media consolidation battle last month upped its bid for Fox to $71.3 billion (which includes Fox’s stake in Sky) after Comcast offered $65 billion — topping the Mickey Mouse’s company’s initial $52.4 billion acquisition amount.

Disney CEO Bob Iger has called Sky – with 23 million subscribers in the U.K., Germany and Italy, and a budding over-the-top video business – the “crown jewel” in the Fox deal.

Comcast claims its superior cash offer (Disney’s bid is cash and stock) has been recommended by an independent committee on Sky’s board of directors.

The company says it has the relevant regulatory approvals in the European Union, Austria, Germany, and Italy —  and expects to complete the acquisition before the end of October.

In a statement, the Philadelphia-based media giant said it has long admired Sky and believes the satellite operator is an outstanding company and a great fit with Comcast Cable.

“Today’s [July 11] announcement further underscores Comcast’s belief and its commitment to owning Sky,” said the company headed by cable veteran Brian Roberts.

Fox and Disney shareholders are slated to vote July 27 on the latter’s bid for 20th Century Fox Film, Sky and related assets. This gives Comcast about two weeks to up its Fox bid. Or does it?

BTIG Research senior analyst Rich Greenfield — in response to media scuttlebutt Comcast and Disney could stop the fiscal escalations with Comcast taking Sky and Disney opting for Fox’s assets — says such a move would be detrimental to both sides.

He said combining Disney and 20th Century Fox Film would dwarf Comcast-owned Universal Studios, while Disney abandoning Sky would give Comcast greater distribution.

“Why start a fight you do not want to finish?” Greenfield wrote in a blog note. “If Disney’s acquisition goal is adding 100% owned and controlled subscriber relationships, why go through all this effort and allow Comcast to own all of or at the very least control Sky?”

Fox Tops Comcast’s Sky Merger Offer

The “Sky” is apparently the limit for 21st Century Fox, which on July 11 upped its offer more than 30% for the British satellite TV operator to £14 per share — valuing the company at $32.5 billion. Fox, in late 2016, offered £10.75 per share of Sky stock (61%) it did not already own.

The bid represents an 82% premium on Sky’s £7.69 per share closing price the day before Fox’s initial bid. It also tops Comcast’s rival offer of £12.50 per share.

“As a founding member of Sky, we have remained deeply committed to bringing these two organizations together to create a world-class business positioned to deliver the very best entertainment experiences well into the future,” Fox said in a statement.

It’s a sentiment shared by The Walt Disney Co. and Comcast, which both have competing takeover bids for select Fox assets, including 2oth Century Fox Film and Sky.

Consolidation in the media world is in full swing following AT&T’s $85 billion acquisition of Time Warner as companies grapple with over-the-top video and subscription streaming video behemoths Netflix and Amazon Prime Video.

Disney last month upped its offer for Fox to $71.3 billion after Comcast bid $65 billion — topping Disney’s initial $52.4 billion acquisition amount.

Federal regulators last month approved Disney’s bid after the Mickey Mouse company agreed to divest 22 regional Fox Sports networks. Across the pond, the U.K. Secretary of State is expected rule on the Fox/Sky deal by July 12.

Regardless, Sky shares closed July 10 at £15.01 per share suggesting the sky is indeed the limit for shareholders convinced the bidding war will continue.

Changes at Disney Accelerate as New Digital Streaming Service, Fox Acquisition Loom

Walt Disney Co. is shuffling executives and shuttering animation division Disneytoon Studios, based in Glendale, as it sets up for major changes at the company.

Disney is in the final stages of a possible acquisition of Fox, with shareholders scheduled to vote on the merger July 27. The company is also planning to bow a Disney streaming service next year to compete with the likes of Netflix and Amazon Prime.

Last week, the company placed film marketing president Ricky Strauss in charge of content and marketing for its streaming service. He will handle original film and TV series for the new service. Strauss reports to Kevin Mayer, installed in March as head of Disney’s direct-to-consumer unit. Among Mayer’s duties are leading the ESPN+ streaming service launched this year and the company’s stake in Hulu. Asad Ayaz will take over Strauss’s former role as studio marketing president. Also, theatrical distribution chief Cathleen Taff was upped to president from EVP.

Last week was also a fadeout for Disneytoon Studios, which was known for direct-to-video sequels to The Little Mermaid, Mulan and other Disney classics; the “Fairies” DTV series featuring the Tinker Bell character; and theatrical forays such as Planes: Fire and Rescue.

“After much consideration, we have made the decision to end production activity and close Disneytoon Studios,” a Disney spokesperson said in a statement. The closure, first reported by Indiewire, is expected to result in the loss of an estimated 75 staff positions.

Animation veteran John Lasseter, who spearheaded Disneytoon Studios, was replaced by Pete Docter and Jennifer Lee on the creative team this month after acknowledging a pattern of inappropriate conduct with employees.

Disneytoon Studios’ Shuttering Due to John Lasseter’s Exit?

News that Disney is officially pulling the plug on one of its namesake animation units – Disneytoon Studios – is noteworthy since the business segment was considered dead nearly five years ago.

“Disneytoon Studios, as of now, is pretty well kaput, Steve Hulett, with The Animation Guild, blogged at the time.

After Disney laid off hundreds from the Glendale, Calif.-based facility, a skeleton crew of less than 100 continued — rejuvenated in part by Pixar Animation founder John Lasseter’s personal interest in the company.

What followed was a string of box office and home entertainment hits, including Planes and its sequel, Planes: Fire & Rescue. The unit’s last theatrical release was Tinker Bell and the Legend of the NeverBeast, released in theaters overseas in 2015. Disneytoon most recently focused on direct-to-video DVD releases and Blu-ray Disc titles.

Notable home video releases included the Disney “Fairies” franchise, which featured TinkerBell and the Great Fairy Rescue, TinkerBell and the Lost Treasureand TinkerBell and Her Magical Arrival, among other titles.

A planned movie about the future of aviation from director Klay Hall (Planes) and Bobs Gannaway (Fire & Rescue) is now reportedly abandoned.

“After much consideration, we have made the decision to end production activity and close Disneytoon Studios,” a Disney spokesperson said in a statement.

What wasn’t mentioned was the impact of Lasseter’s resignation at Disney last month following allegations of inappropriate conduct in the workplace. Lasseter had been on a six-month leave of absence following the allegations.

In a statement, Lasseter said he would begin “focusing on new creative challenges.”

Disney, Fox Shareholders to Vote on Merger July 27

The day after The Justice Department June 27 approved The Walt Disney Co.’s $71.3 billion cash/stock acquisition of 20th Century Fox Film (which includes British satellite TV operator Sky Plc.) both Disney and 21st Century Fox announced their respective shareholders will vote July 27 on the mega-merger.

Both companies canceled previously-slated July 10 shareholder votes after Comcast submitted a rival $65 billion all cash offer that trumped Disney’s initial $52.4 billion bid.

The new vote date gives the corporate parent of Comcast Cable, NBC Universal and DreamWorks Animation less than a month to secure a new bid.

Media reports suggest Comcast – whose cable operations are under threat from over-the-top video services such as Netflix and Amazon Prime Video and needs Fox content – will counter.

“We believe another counteroffer from Comcast for Fox is likely,” John Hodulik, analyst with UBS, told Deadline.com.

Moody’s Investor Service reportedly said Comcast’s current offer would push the company’s debt load to more than $170 billion.

While corporate debt is relative, both Fox and Disney contended their deal would pass regulatory muster more easily than Comcast’s. And apparently it did.

While the antitrust unit of the Department of Justice entered into a consent decree with Disney and 21st Century Fox that allows the acquisition to proceed – mandating the sale of the Fox Sports Regional Networks as a requirement – it has made no ruling on Comcast’s offer.

Regardless, Disney has at least 90 days from the date of closing the transaction to complete the sale, with the possibility that the DOJ can grant extensions of time up to another 90 days. The decree is subject to the normal court approval process.

But first, shareholders have to vote.

 

Disney Sweetens Fox Offer to $71.3 Billion

The Walt Disney Co. June 20 announced it signed an amended acquisition agreement with 21st Century Fox, agreeing to pay $71.3 billion for 20th Century Fox Film, which includes British satellite TV operator Sky Plc., and 20th Century Fox Home Entertainment, among other properties.

The $38 per share in cash and stock offer ups Disney’s existing $52 billion bid and bests Comcast’s rival $65 billion offer. Disney said it would acquire Fox immediately following the spin-off of the businesses comprising “New Fox” as previously announced.

Fox businesses to be acquired by Disney remain the same as under the original agreement. Since the original agreement was announced, the intrinsic value of these assets has increased, notably due to tax reform and operating improvements.

“The acquisition of Fox will bring significant financial value to the shareholders of both companies, and after six months of integration planning we’re even more enthusiastic and confident in the strategic fit of the assets and the talent at Fox,” Disney CEO Bob Iger said in a statement.

Iger said that at a time of “dynamic change” in the entertainment industry, combining Disney and Fox’s businesses and franchises would translate into more “appealing high-quality content,” while expanding Disney’s ambitious direct-to-consumer offerings and international presence.

Indeed, the acquisition would significantly increase Disney’s international footprint and expand its over-the-top video offerings, which include ESPN+; a Disney-branded streaming video-on-demand service launching in late 2019 that will feature Disney, Pixar, Marvel and “Star Wars” films along with a host of exclusive original content and library titles; and its ownership stake in Hulu. As a result of the acquisition, Disney would hold a controlling stake in Hulu.

Transaction Details

The deal allows Fox shareholders to choose either Disney stock or cash for their shares. Disney is expected to pay a total of approximately $35.7 billion in cash and issue approximately 343 million new shares to Fox shareholders, representing about a 19% stake in Disney on a pro forma basis.

Disney would assume about $13.8 billion of net debt of Fox. The acquisition price implies a total equity value of approximately $71.3 billion and a total transaction value of approximately $85.1 billion (assuming no tax adjustment). Disney has secured financing commitments for the cash portion of the acquisition.

As announced in the original acquisition agreement, the businesses to be acquired by Disney include Fox’s film production businesses, including 20th Century Fox, Fox Searchlight Pictures and Fox 2000 Pictures; Fox‘s television creative units, 20th Century Fox Television, FX Productions and Fox21; FX Networks; National Geographic Partners; Fox Sports Regional Networks; Fox Networks Group International; Star India; and Fox’s interests in Hulu, Sky plc, and Tata Sky.

The acquisition would occur immediately after the spin-off by 21st Century Fox of the Fox Broadcasting network and stations, Fox News Channel, Fox Business Network, FS1, FS2 and Big Ten Network into a newly listed company referred to as New Fox.

If 21st Century Fox completes its acquisition of the 61% of Sky it doesn’t already own prior to closing of the Disney acquisition, Disney would assume full ownership of Sky, including the assumption of its outstanding debt, upon closing.

Disney believes the transaction has a clear path to regulatory approval. Both companies have spent the past six months working toward meeting all conditions necessary for closing. In the amended agreement, Disney has increased the scope of its commitment to take actions required to secure regulatory approval.

The amended agreement has been approved by the boards of directors of Disney and 21st Century Fox.

Sky’s Cycling Dilemma

NEWS ANALYSIS — Chris Froome, racing for the $40 million Team Sky professional cycling team sponsored by the British satellite pay-TV operator, May 27 won his third straight Grand Tour stage race, finishing first overall in the Giro d’Italia (Tour of Italy) that began in Jerusalem and ended three weeks later in Rome.

For Froome, who has won four Tour de France races, in addition to last year’s Vuelta a España (Tour of Spain), victory came May 25 after a jaw-dropping win into Bardonecchia that saw the South African-born rider erase a seemingly insurmountable three-minute, 21-second deficit in the overall standings to take the lead for good.

The win brought back bad memories of American Floyd Landis’ similar performance in 2006 when he overcame a significant time gap to vanquish his Tour de France rivals on the next-to-last stage.

Landis was eventually stripped of the win after testing positive for performance-enhancing drugs — leading to a chain of events that would ultimately bring down his former teammate Lance Armstrong on similar charges.

Froome and Team Sky are supposed to be different than Armstrong’s heavy-handed squads of the early 2000s that pushed systematic doping to the extreme.

Founded in 2010, Team Sky has dominated professional and Olympic track cycling with a mandate of clean racing. It is a bragging right of sorts for corporate parent Sky, which eyes the team’s “inspiration and participation” as grounds for its massive marketing spend.

But it remains to be seen how much longer Sky — which has first-run distribution deals with major Hollywood studios, direct-access to Netflix and includes DVDs with electronic sellthrough purchases on the Sky Store platform — will support the team financially at it sits in the merger crosshairs of The Walt Disney Co., 21st Century Fox (which owns 39% of Sky), and Comcast.

And money is hardly the issue.

Team Sky’s dominance has produced increasing naysayers, who contend its results are due to exploiting loopholes within doping rules.

Indeed, Froome, a well-documented asthmatic, often uses inhalers during competition. But apparent misuse of inhalers contributed to Froome testing positive for illegally high levels of an asthma drug during last year’s Vuelta.

The case is under review by cycling’s governing body. Should Froome be found guilty, he would be suspended and stripped of the Vuelta win, and likely the Giro as well.

Without its marque rider, Sky would probably drop its sponsorship.

But in the meantime, Froome keeps racing. As does Team Sky, whose Columbian rider Bernal Gomez recently won the Tour of California.

“My conscience is clear,” said Froome in Rome.

Bob Iger Steps Up to Plate Following Latest School Shooting

In the aftermath of the latest (May 18) school shooting (the 22nd in 2018!) that saw a deranged teen (with legally-acquired assault weapons) slaughter 10 high school classmates, including a teacher, and wound 10 others in Santa Fe, Texas, our politically-divided country was again reduced to the repetitious cycle of “thoughts and prayers,” arguing on social media and paralyzed lawmakers (including President Trump) unwilling or unable to confront gun control, the NRA or the 2nd Amendment.

Only this time the vacuous grieving to the horror of Santa Fe High School was quickly overshadowed by The Royals, or obsession over the wedding of Prince Harry and his American “Princess,” actress Meghan Markle.

The reported $40 million ceremony May 19 in St George’s Chapel at Windsor Castle in the United Kingdom, drew 18 million television viewers in the United States. An impressive statistic in today’s fractured TV landscape.

So immune has the media become toward school shootings, that CNN’s Anderson Cooper, after interviewing the father of a slain student at the most-recent school shooting in Parkland, Fla., quietly pivoted to the network’s non-stop coverage of The Wedding.

In the midst of Saturday’s spectacle, Bob Iger, chairman and CEO of The Walt Disney Co., took to social media with a different mindset: “By not acting to stop gun violence, we are failing our children and failing our country,” he tweeted.

A strong statement coming from the boss of a media giant whose family values brand goes out of its way not to create controversy.

But Iger has long been less than shy about gun violence, telling Variety following the Las Vegas shooting that left 59 concertgoers dead, the country has a crisis and gun control shouldn’t be political.

“We have the worst record in the modern world when it comes to gun violence and gun deaths,” he said. “We should be demanding a dialogue about this from our politicians and demanding some productive action.”

Indeed, advocating — no, demanding — safety for our children at school shouldn’t be controversial. It should be common sense.

 

Lachlan Murdoch to Become Chairman/CEO of New ‘Fox’

Twenty-First Century Fox May 16 revealed the senior management team at the revamped “Fox” once it consummates the asset sale of 20th Century Fox Film Corp. to The Walt Disney Co. (or Comcast).

Current executive chairman Lachlan Murdoch will serve as chairman and CEO of the new company, while his father, Rupert Murdoch, will serve as co-chairman. John Nallen, CFO at 21st Century Fox, will take a broader role as new COO.

No mention of current Fox CEO James Murdoch, who apparently won’t have a role in the new company.

The younger son was seen as more progressive politically than his father and brother. Indeed, James was reportedly embarrassed by ongoing sexual harassment issues at Fox News, and late last year wrote an email criticizing President Trump’s response to the deadly skirmish in Charlottesville, Va., between protesters and white nationalists and alt-right groups that left one woman dead and 19 people injured.

The downsized Fox will feature Fox News Channel, Fox Business Network, Fox Broadcasting Co., Fox Sports, Fox Television Stations Group, and sports cable networks FS1, FS2, Fox Deportes and Big Ten Network.

It will house the top cable news channel in the country, and a stations group in nine of the 10 largest metro areas in the U.S. Its broadcasting and cable sports brands will have long-term sports rights to the NFL, MLB, World Cup soccer and NASCAR.

“We have worked through the winter ‘standing up’ a reimagined independent Fox,” the younger Murdoch said in a statement.

Rupert Murdoch said the revamped company would become the only media company solely focused on the domestic market.

“Focused on what Americans love best – sports, news and entertainment,” he said.

Fox’s Lachlan Murdoch Declines Comment on Comcast Bid, Touts Studio Home Entertainment Releases

Lachlan Murdoch, executive chairman of 21stCentury Fox, refused to comment on “market speculation” surrounding a possible $60 billion cash offer from Comcast for 20thCentury Fox Film Corp., and related assets.

The Walt Disney Co. currently has an accepted $52.4 billion stock offer for Fox – a transaction that must be approved by shareholders and regulators.

That didn’t stop Rich Greenfield, analyst with BTIG Research, from asking whether any offer other than Disney’s would be considered.

“We are committed to our agreement with Disney … and working on the conditions to bring it to closure,” Murdoch said, adding Fox’s board was aware of its fiduciary duty to entertain all offers.

Notably, Disney has to pay Fox $2.5 billion should the deal not be approved, while Fox is on the hook to Disney for $1.52 billion should it back away from the deal.

Meanwhile, speaking on the brief (28-minute) third-quarter (ended March 31) fiscal call, Murdoch gave a shout out to recent home entertainment releases of The Greatest Showman, The Shape of Water and Three Billboards Outside Ebbing, Missouri and Maze Runner: Death Cure.

“The home entertainment release of these films, along with the theatrical release of Deadpool 2, should propel a strong fourth fiscal quarter,” Murdoch said.

The Fox film unit generated pre-tax operating income of $286 million, which was down 23% decrease from $373 million in operating income in the prior-year quarter. Revenue was flat at $2.24 billion.

The operating income decline reflected lower contributions from the television production business due to higher deficits related to more new drama series delivered during the quarter and the absence of revenue from the prior-year subscription-video-on-demand licensing of “The People v. O.J. Simpson: American Crime Story”.

Fox, like other Hulu corporate parents Disney, Comcast and Time Warner, accrued increased losses from the SVOD service and Hulu Live online TV service. Fox lost $148 million on Hulu in the quarter, up from a loss of $62 million during the previous-year period. Through nine months, Fox has lost $318 million on Hulu compared to a loss of $161 million last year.

Separately, Murdoch acknowledged presence of a “potential further offer [i.e. Comcast],” for “our businesses” – reiterating a “no-comment” company policy on the issue.

He said he expected U.K. regulatory approval shortly for Fox’s bid for shares of satellite TV operator Sky it does not already own. Comcast also has an outstanding bid for Sky that substantially exceeds Fox’s offer.

“Comcast has just begun its regulatory process, and we think it’s very reasonable that Comcast undergo a very robust regulatory review – which could take months,” said Murdoch. “Given Comcast’s bid for Sky, we are considering our options.”

Murdoch said planning for the New Fox (absent 20thCentury Fox) was well underway, including the just-announced $910 million acquisition of seven TV stations from Sinclair Broadcast Group.

Fox chairman Rupert Murdoch and his sons, are keeping Fox News, including new SVOD service Fox Nation, Fox Broadcasting and Fox Sports.