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Media conglomerates and mergers


Phantom Roxas

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Sounds like they still need a ruling from a federal judge, and for Fox to formally vote. While Fox does seem to prefer Disney, I'm seeing really mixed feelings regarding Comcast. The Murdoch's really don't want them, but shareholders still need to vote if Comcast makes a better bid. Comcast is still considered a regulatory risk, and while they're just copying whatever terms Disney is agreeing to, those terms aren't really "one size fits all." It may be good for putting Fox with Disney, but not necessarily putting Fox with Comcast.

True, but the fact that the DoJ isn't going to set in if the divestment happens should make everything else easily attainable, considering that DoJ intervention would lead to yet another AT&T/Warner so soon after the last one, and we know how long that took to finish.

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True, but the fact that the DoJ isn't going to set in if the divestment happens should make everything else easily attainable, considering that DoJ intervention would lead to yet another AT&T/Warner so soon after the last one, and we know how long that took to finish.

 

Which is why I think they gave their decision so quickly this time. I think they could have had a stronger case this time, though Makan Delrahim did previously suggest that the way this deal was structured was more careful. He was very adamant about getting divestitures from either AT&T or Time Warner, so Disney and Fox being willing to do this likely makes the DOJ more lenient in this case, as well as avoiding anything that may be so drawn out.

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Alright, since the Disney/Fox is making some progress, I have a few more articles to post right now, so here goes.

 

https://variety.com/2018/tv/news/disney-could-pay-more-for-sky-after-fox-deal-1202860458/

 

Since Disney and Comcast's bidding war for Fox is also a bidding war for Sky, investors are arguing that since Disney has agreed to raise their bid for Fox, then either Disney or Fox should similarly raise their own bid for Sky.

 

https://deadline.com/2018/06/fox-sets-shareholder-meeting-for-vote-on-disney-offer-1202419230/

 

Fox will be holding their shareholder meeting on July 27 to determine whether or not to move forward with the Disney deal. Assuming that the votes are in favor of Disney, then the only step left should be for a federal judge to rule in light Disney and Fox's agreement with DoJ.

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http://thehill.com/policy/technology/394498-t-mobile-sprint-execs-pitch-merger-to-congress

 

Sprint and T-Mobile presented their merger to Congress last week. As far as competition is concerned, they're mostly relying on how they're the third and fourth biggest players, and that they need to compete with AT&T and Verizon. I think this argument is fair regarding trying to compete with AT&T in light of them acquiring Time Warner, but for the most part Verizon has been hurting that argument by… basically not doing anything. Verizon seems to be doing well enough, but it's not bulking up like any of the other major carriers, so the disparity between Sprint/T-Mobile and Verizon is not that significant. Sprint and T-Mobile may need to compete, but as I brought up earlier in this thread, some of the smaller players seem so far behind that this would still significantly reduce competition from three to four.

 

https://www.bloomberg.com/news/articles/2018-06-27/fox-rises-on-report-that-comcast-bid-may-get-private-equity-help

 

Comcast is looking for private equities to gain the money to increase their bid for Fox. I know that the general expectation is that both Comcast and Disney will forego business sense for the sake of trying to get Fox, but on the other hand there's people expecting Comcast to drive up the price so Disney has to pay more, which means Comcast may not mind losing Fox, so long as they can force Disney to pay more. But again, this is a ridiculously stupid strategy on Comcast's part, because to drive up the bid in the first place, Comcast has to borrow a lot of money, which is going to put Comcast in even more debt.

 

Comcast's approach is cutting their nose to spite their face. Comcast is supposedly afraid that if they don't bulk up, someone could try buying them, but if they're going to put themselves in debt losing these bidding wars to Disney, they'll just get bought up anyway. Comcast is rumored to pursue buying Lionsgate instead if they don't get Fox, but depending on how badly they botch this, I'd wonder if they could afford that.

 

Now, there's still the possibility analysts have proposed where Disney and Comcast could split the assets, with both of them getting their own parts of Fox, or Disney gets Fox as a whole while Comcast gets Sky. I personally don't see that happening, since Disney is apparently too tied up to do that, as it would mean creating a new deal separate from the current agreement between Disney and Fox. It just seems like Comcast's best chance to settle for a compromise, but why would Disney want to compromise with them when Disney has the advantage? Disney is far enough long that they should see this through to the end, provided that both a federal judge ruling and Fox's July 27 vote are in their favor.

 

If Comcast bids again, I hope it doesn't delay the July 27 vote. Comcast does need its potential considered, though considering how they've been lagging behind since Fox first chose Disney, the vote should not be delayed again just because of Comcast's bid. It should be on Comcast to raise their bid as soon as possible if they want to stay in this, and give Disney plenty of time to counter-bid. The vote was originally scheduled to take place a week from today, and with Disney back in the lead, this is the same situation that Fox's shareholders were already going to be voting on anyway. If Comcast is under pressure to bid again, then this round of the bidding war needs to wrap by the end of the month.

 

Though really, Comcast should just walk away from Fox and focus on Sky. Fox is a middleman in all of this, and Sky is the real prize.

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I'm sure Comcast will do that. I wouldn't be surprised if the two go hand in hand, with Comcast being willing to take on the debt precisely because they could use the net neutrality repeal to justify it. AT&T is also raising their prices on DirecTV Now, despite claiming that they totally would not do exactly that in the Time Warner trial.

 

Customers leaving would likely not hurt them too much, though. They're still the largest broadband company, so it's a case of holding their customers hostage. What, you're going to leave them for some small company that provides worse service? I'll have to look into the specifics for my own sake, but supposedly there's some legal trap that makes it difficult for myself and other people in my area to choose anyone that is not AT&T or Comcast. People are already stuck in a trap between both of them, so Comcast can just keep exploiting that.

 

Comcast had a net neutrality agreement with the FCC that expired back in January, and it also had an agreement with the DoJ in light of when Comcast purchased NBCUniversal, but those conditions will expire in September. I would not be surprised if Comcast is trying to get involved in the bidding war now so that they could have an advantage once those conditions expire. The longer Comcast can drag this out, the better it is for them, given the idea that Comcast will be "unleashed" from those restrictions in just a couple of months. While Disney and Fox want to reach a deal as soon as possible, Comcast is trying to play a long game here.

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https://www.fiercecable.com/video/oath-ceo-armstrong-considers-buying-out-verizon-report

In something of an antithesis to this thread, Tim Armstrong is looking to buy Oath out of Verizon. Verizon is still the odd one out in this thread, given that it's been avoiding some major mergers. If Oath does manage to spin itself out from Verizon, I don't think that should hurt Verizon too badly. Though I'd wonder how long Oath could last before being bought up by someone else. As much as Armstrong would love Oath to compete with Facebook and Google, I just don't think that's possible. Putting aside how I find it hard to believe people would actually know what Oath even is, it's just the merger between AOL and Yahoo!, both of which failed rather unceremoniously. Oath has an uphill climb ahead of it.

 

https://www.fiercewireless.com/wireless/shentel-carrier-at-crossroads-sprint-and-t-mobile-merger

 

Since one of the things that's come up with Sprint and T-Mobile is the idea of smaller players, I'm not sure if anyone is familiar with Shentel (I hadn't heard of them myself before finding this article), but it's been a Sprint affiliate for some time. Since the Sprint/T-Mobile merger is going to emphasize the T-Mobile name, there would be an overlap with Shentel. Either the New T-Mobile or Shentel could buy the other's wireless business. Shentel is more of a regional player, but given this unique situation, it does show that the Sprint/T-Mobile merger won't just end with both of them.

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https://www.theguardian.com/media/2018/jul/08/rupert-murdoch-set-to-receive-clearance-in-bid-for-full-control-of-sky

 

Fox may receive approval to continue with their bid for Sky this week. Comcast has still made the higher bid, so if Fox gets approval, Fox might celebrate with raising their bid for Sky. It'd probably be better for Fox to keep this up. While they don't have an endless amount of money, they're who Disney and Comcast are fighting over anyway. Might as well take the risk to put as much money on the line as they could to get Sky as long as they have a new owner waiting to salvage them.

 

And that's what makes Comcast's willingness to put themselves in debt more ridiculous. "The hunter who chases two rabbits catches neither." Comcast is trying to bid for Fox and Sky, and even if there's a possibility where Comcast owns Fox and Fox owns Sky, those would still be two separate deals. The deals and conditions surrounding Disney, Fox, Sky, and Sky News are all preparing for how the prospective holding company will be structured. It's a tangled mess, and while Disney/Fox and Fox/Sky are also separate deals, there seems to have been more consideration towards how the deals overlap.

 

Disney, in short, is working with Fox, so while Disney does stand to gain Sky at the end of all this, it's through helping Fox. Comcast's efforts are far more hostile, because even though it's trying to get both Fox and Sky, Comcast is showing no respect towards Fox themselves. Right now, Comcast's dynamic with Fox is that they are trying to buy Sky out from under Fox, and then expect Fox to agree to be bought out by Comcast. Essentially, expecting Fox to side with the company that may defeat them in a deal.

 

I get that, if Comcast offers a superior bid to Disney's for Fox, Fox's shareholders would be foolish to turn that down by having resentment over a personal slight overtake fiscal responsibility. But unless Comcast tries to coordinate their deals like Disney has, I can't see Comcast getting both Fox and Sky.

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Comcast has still made the higher bid...

https://www.nytimes.com/2018/07/11/business/dealbook/fox-sky-bid.html

 

Not anymore, Fox upped their bid for Sky. Furthermore, the article suggests that Comcast may be giving up on the Fox bid against Disney and is solely focusing on Sky.

 

EDIT: Fox Shareholder Sues to Stop Disney Acquisition

https://www.hollywoodreporter.com/thr-esq/fox-shareholder-sues-stop-disney-acquisition-1125698

 

This is getting interesting.

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https://www.cnbc.com/2018/07/10/comcast-increases-cash-offer-for-sky-to-34-billion.html

 

Fox and Comcast raised their bids? Interesting. Comcast is still in the lead, since they raised their bid just hours after Fox. If Comcast is going to give up on Fox, then that's definitely a game-changer. I could understand Comcast backing off from Fox, because as I said, they've been splitting their focus too thin. Sky is the safer bet, and Sky's board does prefer Comcast as it is. The only reason I saw that Comcast had left to keep bidding for Fox was that, even if they didn't win, they could still force Disney to end up paying more for Fox. However, that would hurt Comcast more, so might as well stop here.

 

I'm curious about that lawsuit. Seems that the main issue is that the terms could be misleading, and risk forcing Fox to vote in favor of a deal that would not be in their best interests. If there's anything more to it, though, it'll have to be resolved over the next couple of weeks. With Comcast seemingly giving up on Fox, I can't see much else that could delay that vote.

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So, looks like Comcast expected Fox to raise the bid, and my article suggested Comcast would up the bid. I wonder how soon Fox will raise the bid again.

 

I believe either Comcast or Fox had a deadline to bid for Sky by Friday, so this was likely meant to beat that deadline. Given the Sun Valley conference, this seemed like a very rushed bid. I imagine higher bids will come later in the month.

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https://variety.com/2018/tv/news/21st-century-fox-sky-bid-approved-comcast-1202868291/

 

The UK gave Fox the approval to bid for Sky based on the terms mentioned before, such as selling Sky News to Disney and compelling Disney to keep funding Sky News for the next fifteen years without selling it. That approval is likely part of why Fox had raised their bids, and while we already have the bidding war, this grants them permission to formally present those offers to Sky's shareholders directly.

 

https://variety.com/2018/tv/news/takeover-body-hikes-price-disney-would-need-to-offer-for-sky-1202872637/

 

As was expected, the UK Takeover Panel has demanded that Disney must now pay a higher price for Sky to match Fox's own bid for Sky, since Disney itself had previously raised their bid for Fox.

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https://www.cnbc.com/2018/07/12/how-an-obscure-british-regulation-called-the-chain-principle-is-chan.html

 

It's called the chain principle. Keep in mind that this is based on U.K. regulatory rules than our own. Fox could technically be considered as buying Sky on Disney's behalf, but their perception is that, for as much as they're bidding on Fox, much of that money is only going to Fox's shareholders, not Sky's. So rather than getting Sky indirectly through Fox, they want a more direct bid from Disney. The Disney/Fox and Fox/Sky deals are still considered separate deals, so a Disney/Sky deal is meant to bridge that gap.

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Couldn't that be solved by a joint bid from Disney and Fox, so Disney has some skin in the game?

 

Probably not. I don't believe that a sale of Sky News to Disney has been formalized at all; merely stated to be an acceptable condition for Fox's purchase of Sky, though such a sale could tie in with what you're suggesting. The potential for Disney to get involved has come up, though mostly as backing Fox in some fashion.

 

Regardless of the Sky News sale, I believe a joint bid is not possible. For example, before Comcast backed down from Fox, one solution that was suggested was that Disney and Comcast could split the Fox assets for sale. Bob Iger said that he could not do that because of the laws in place, and it would be considered a violation of his current deal with Fox. He would not altering the initial deal with Fox, but rather creating a second, contradictory deal. The agreement to divest Fox's RSNs - where Comcast was apparently seeking buyers - is a condition imposed on the initial deal.

 

The specific condition is that Disney must buy Sky directly only if they finish acquiring Fox before Fox acquires Sky. Disney is not under any obligation to buy Sky yet, but if Disney buys Fox first, then Disney would have to continue where Fox left off, and continue the bid for Sky. So a joint bid is not necessary at this time, but if they were to pursue one, it would be considered a separate bid from Fox's current bid for Sky.

 

Essentially, here's the breakdown of all the deals at the moment, considering Comcast is likely to give up on Fox:

- If Disney buys Fox, Fox must divest its regional sports networks to third parties.

- If Disney buys Fox before Fox buys Sky, then Disney must buy Sky in Fox's stead.

- If Fox buys Sky, they must divest Sky News to Disney.

- If Comcast buys Sky, there will be no conditions. The sale of Sky News is purely designed to separate Sky News from Fox, so there is no concern about Comcast acquiring Sky News.

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https://www.bloomberg.com/news/articles/2018-07-16/disney-spells-it-out-fox-may-not-increase-its-bid-for-sky
 
Seems like we are moving towards the scenario where Disney gets Fox while Comcast gets Sky. Disney submitted a filing saying "Fox may elect not to increase the price offered by it in the Sky acquisition and any increase in the debt financing for the Sky acquisition would require Disney’s consent, which Disney may elect not to provide.”

 

That language highlights the risk here. A higher bid primarily means more debt, and according to Disney's estimates, they would barely get a 7% return rate on Sky with this deal by 2028. Given that the condition for Fox acquiring Sky is selling Sky News, which Disney would have to fund for fifteen years and cannot sell without regulatory consent, Sky would become far too much of a money sink for Disney to be worth it in the long run.

 

Fox votes on Disney in ten days. I have to wonder if Disney restricting Fox from purchasing Sky could put a damper on the vote.

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https://variety.com/2018/biz/news/comcast-fox-sky-disney-bidding-war-drops-out-1202878103/

 

It's only been rumored, but now it's official: Comcast has dropped out of the bidding war for Fox so they can focus on acquiring Sky.

 

https://www.bloomberg.com/news/articles/2018-07-18/key-u-k-sky-hearing-scheduled-for-same-day-as-fox-disney-vote

 

Next Friday is looking to be a big day. Aside from Fox's shareholders voting to move forward with the Disney deal, U.K. officials will determine the value of Sky for a minimum bid from Comcast and Fox. Given Disney's reticence in allowing Fox to continue bidding for Sky, this is more likely to be what Comcast was preparing for, and why they needed to drop their bid, while Fox may have to give up Sky.

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https://www.forbes.com/sites/jonathanberr/2018/07/24/heres-why-disney-isnt-giving-up-on-sky-without-a-fight/#4f7f901865a1

 

There are two more days until Fox votes on the Disney deal. Given the speculation over whether or not Disney may gave up, I think this offers some interesting analysis. I've seen a theory that Comcast wasn't looking to win Fox, and just force Disney to bid high enough for Fox to discourage Disney from pursuing Sky as well. The bidding war for Sky will probably wait until after the vote, though apparently Brian Roberts is willing to buy a majority stake and share ownership with Disney. So this could end with a joint ownership of Sky, but we'll have to wait and see.

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https://www.nytimes.com/2018/07/27/business/media/disney-fox-merger-vote.html

 

In a rather short meeting, Disney and Fox's shareholders have approved of the merger.

 

https://www.hollywoodreporter.com/news/walt-disney-files-fox-deal-approval-brazil-1130263

 

Disney has also filed for regulatory approval in Brazil. While the deal is moving forward, they still need antitrust reviews. At the very least, this seems to lock out another bidding war for Fox that Comcast tried. I'll keep focusing on whatever happens with the Disney/Fox deal, and we also have the Sky bidding war to watch out for.

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