Mouse Bite: Disney Strikes Back With Sweeter Bid For Fox


One week after Comcast unveiled what it calls a “superior all-cash proposal” to acquire “21CF” after the spinoff of “New Fox,” The Walt Disney Co. struck back with the signing of “an amended acquisition agreement that would see it acquire 21CF for $38 per share in cash and stock.

Fox likes it.

In a big bump upward from the June 12 offer from Comcast, which presented to Fox “a superior proposal” to acquire the businesses that Fox has agreed to sell to Disney for $35 per share in cash, Disney moved ahead with new plans that see it expanding its original offer in a big way — presenting a $10-per-share jump from Disney’s original offer of $28 per share for 21CF.

Comcast had presented Fox a counter-offer representing a premium of approximately 19% to the value of Disney’s all-stock offer as of Noon Eastern on Wednesday (6/13).

Disney’s counteroffer involves 50% cash and 50% stock, the company said prior to Wednesday’s Opening Bell on Wall Street.

In a statement, Disney CEO Bob Iger said, “The acquisition of 21st Century 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. At a time of dynamic change in the entertainment industry, the combination of Disney’s and Fox’s unparalleled collection of businesses and franchises will allow us to create more appealing high-quality content, expand our direct-to-consumer offerings and international presence, and deliver more personalized and compelling entertainment experiences to meet growing consumer demand around the world.”

Details of the revised offer from Disney see the company paying approximately $35.7 billion in cash and issuing roughly 343 million new shares to 21st Century Fox shareholders—representing about a 19% stake in Disney on a pro forma basis.

Disney further explains that “the collar on the stock consideration will ensure that 21st Century Fox shareholders will receive a number of Disney shares equal to $38 in value if the average Disney stock price at closing is between $93.53 and $114.32.”

In turn, 21st Century Fox shareholders will receive an exchange ratio of 0.3324 shares of Disney common stock if the average Disney stock price at closing is above $114.32 and 0.4063 shares of Disney common stock if the average Disney stock price at closing is below $93.53. Elections of cash and stock will be subject to proration to the extent cash or stock is oversubscribed.

Importantly, Disney is agreeing to assume some $13.8 billion of 21st Century Fox’s net debt. 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 21st Century Fox’s film production businesses, including Twentieth Century Fox, Fox Searchlight Pictures and Fox 2000 Pictures; Fox’s television creative units, Twentieth 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.

This would instantaneously transpire following the spin-off 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.

What about the DOJ and Federal government scrutiny of such a deal?

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

In a separately issued statement, 21st Century Fox Executive Chairman Rupert Murdoch said, “We are extremely proud of the businesses we have built at 21st Century Fox, and firmly believe that this combination with Disney will unlock even more value for shareholders as the new Disney continues to set the pace at a dynamic time for our industry. We remain convinced that the combination of 21CF’s iconic assets, brands and franchises with Disney’s will create one of the greatest, most innovative companies in the world.”

With 21CF entering into an amended and restated merger agreement with Disney, Fox noted that it offers “a package of consideration, flexibility and deal certainty enhancements that is superior to the proposal made by the Comcast Corporation on June 13.”

Where does this leave Comcast? It’s not knocked out, but it will need to do some stepped up courting to the summertime Belle of the ball.

“In light of the revised terms contained in the amended and restated Disney Merger Agreement, 21CF’s board, after consultation with its outside legal counsel and financial advisors, has not concluded that the unsolicited proposal it received on June 13 from Comcast could reasonably be expected to result in a ‘Company Superior Proposal’ under the Disney Merger Agreement,” Fox said.

But, it added, the amended and restated Disney Merger Agreement contains no changes to the provisions relating to the ability of Fox directors to evaluate a competing proposal.

As such, it is now up to Comcast to decide how to respond — and if it’s up for a fight for Fox.