Comcast has reportedly asked investment bankers to increase its credit line by as much as $60 billion so it can make an all-cash offer for the assets 21st Century Fox has already agreed to sell to Disney.
Reuters cited three anonymous sources as saying Comcast has asked for an increase in its bridge financing facility. It was already reported in early February that Comcast would seek to outbid Disney’s $52 billion all-stock offer should AT&T’s attempt to buy Time Warner Inc. for $85.4 billion prevail in federal court.
Comcast successfully convinced U.S. regulators to let it buy NBCUniversal in 2011 and has since turned that company’s film, TV and theme park business into major revenue earners. In February, Comcast outbid Fox for the 61% stake the media company doesn’t own in U.K. satellite company Sky Plc., agreeing to pay $30 million. Comcast already took a bridge loan to make that offer.
For its part, Disney successfully outbid Comcast in December for a collection of assets that include Twentieth Century Fox, Fox Searchlight Pictures and Fox 2000, along with the television creative units, Twentieth Century Fox Television, FX Productions and Fox 21. Disney will also acquire FX Networks, National Geographic Partners, Fox Sports Regional Networks, Fox Networks Group International, Star India and Fox’s interests in Hulu, Sky plc, Tata Sky and Endemol Shine Group.
Fox board members and shareholders reportedly feared Comcast’s ability to secure regulatory approval for the acquisition.
Australian media baron Rupert Murdoch owns 17% of Fox but has 40% of the voting control. He reportedly favors all-stock deals, as they impose no tax liability on shareholders.
Comcast, meanwhile, has seen its share price decline about 25% since it made its Sky bid in February, with investors frustrated that the cable company isn’t using its free cash to institute stock buybacks.
"In the wake of Comcast's ~$30bn bid for Sky, investors have focused on the company's leverage, questioning the strategy to lever up for Sky rather than repurchase shares at a lower multiple," wrote Jefferies analyst Scott Goldman in a note to investors this morning. "The acquisitions of both Fox and Sky for nearly $100bn in all-cash would dramatically change the company's leverage profile. We estimate net leverage could approach ~4.5x, including full synergies."
Meanwhile, like all cable companies, Comcast is fighting investor sentiment that has suddenly turned negative on the cable business, with fears that the industry is about to get hammered by cord cutting, saturation in U.S. wireline broadband and competition from 5G wireless.