Brian Roberts could possibly be the smartest deal guy in media. Yes, he did want the 21st Century Fox assets to add to his programming empire. And, yes, he ultimately forced Disney to pay 2x its original offer for those same assets.
Among the incredible Fox assets Disney will add to its programming lineup are FX and National Geographic cable channels, Fox’s film & TV studios (the libraries, not the real estate), Fox’s 22 Regional Sports Networks (more on this later), stakes in Hulu and India’s Star and a 39% interest in Sky (more on this, too).
Shareholders from both Fox and Disney approved the transaction on July 27. The Department of Justice also gave its approval from an antitrust perspective, with the qualification that Disney dispose of Fox’s 22 regional sports networks (as Disney already owns ESPN, and the DOJ felt owning the RSNs, along with ESPN, could give Disney too much market share creating an anti-competitive environment). The Disney/Fox transaction is still pending approvals from foreign governments, including China and the EU, but there seems to be less of a concern with these foreign authorities regarding market concentration, post-closing. I feel the deal, as structured, will eventually close.
It should be noted that Rupert Murdoch and family will not be out of a job, as they will still own the Fox Broadcast Network, 28 Fox television stations, Fox News, Fox Business News, FS1, FS2, BTN and the 20th Century Fox Studio/Lot in Century City. In addition, the family has retained ownership in multiple newspapers and magazines including the (UK) Post, the Wall Street Journal, the New York Post and HarperCollins book publisher. Oh, they’ll also have a bunch of dough, and Disney common stock, from the sale of their interest in 21st Century Fox. Rupert worked hard for this and deserves, more than anyone else, the payday that comes from the sale of these assets.
If Disney doesn’t bid on the remaining 61% of Sky it doesn’t own (post-closing), and sells its interest to Comcast which, at the current Comcast bid level would net Disney $13 billion, and sells the RSNs for +$20 billion, it would mean that Iger paid around $38 billion (or less) for these great content assets, plus stakes in Hulu and Star. Not such a bad deal for Disney, and disposing of some of these acquired assets is a great way for Disney to rationalize its Balance Sheet.
Back to the genius of Brian Roberts. Brian, through aggressive bidding for Fox’s assets, forced Disney to pay 2x Disney’s first offer to Fox. If Brian wanted the Sky assets more than the Fox assets all along, he did a great job burdening Disney with too much debt, and regulatory morass, effectively taking Disney out as a viable bidder for Sky. I think this was a brilliant maneuver on Brian’s part. I’ve seen this tactic used in the past. In fact, I participated in a similar maneuver almost 20 years ago. It works.
Brian will either end up with 100% of Sky, or force Disney to (possibly) overpay for the remainder of Sky that it doesn’t already own. Either way, it’s a win for Brian. I always say, leverage not used is leverage lost. Looks like Brian might feel that same way.
Below are some interesting reads pertaining to the Disney/Comcast/Fox/Sky deal dynamics. Happy reading.
- Disney’s shareholders have voted to buy those Fox assets. Now what? (Marketwatch)
- Disney and Fox Are Merging. Why Is Sky Still in Play? (Bloomberg)
- Brian Roberts: Comcast Dropped Out of ‘Unique Opportunity’ to Buy 21st Century Fox Because Price Soared (Variety)
- Disney Shareholders Approve Fox Assets Purchase (Bloomberg)
- Market predicting that Comcast will end up owning Sky: Expert (CNBC)
- After exiting battle for Fox, Comcast fires ‘warning shot’ to Disney over Sky takeover, analyst says (CNBC)
- DOJ Blesses Disney-Fox Merger With Sale Of Regional Sports Nets (Forbes)
- Why Disney Should Have Multiple Suitors for Fox’s 22 Regional Sports Networks (The Wrap)
- Disney receives shareholder approval to buy Fox assets (CNBC)
- Disney to Buy 21st Century Fox Assets for $52.4 Billion in Historic Hollywood Merger (Variety)