As if Comcast chief executive Brian Roberts needed any more incentive to walk away from buying 21st Century Fox’s entertainment assets—beyond a potential shareholder revolt.
Media business historians will mark this as the week when the Walt Disney Company pulled away in its competition for the Fox assets. For one, The House of Mouse was able to secure antitrust approval from the Justice Department for its agreed-upon $71.3 billion cash and stock offer.
“This approval makes it tough for Comcast to engage with Fox shareholders meaningfully unless it comes up with a significantly higher or more attractive offer in some form to account for the potential delay in the approval process,” wrote Barclays analysts in a note to investors this morning.
As the Wall Street Journal reported this week, Comcast is exploring deals with other companies and private equity firms, looking for options in case the bidding approaches that lofty level.
One scenario Comcast is reportedly exploring—an investment partner would acquire the U.S. Fox assets, while Comcast would assume international components like the U.K.’s Sky and India’s Star. Amazon is listed as one potential partner in the WSJ report.
Comcast, which has already had a $65 billion all-cash offer rebuffed, is facing the prospect of astronomical debt—exceeding $170 billion—in order to come up with a counter bid for Fox on its own.
As far back as February, when Comcast dipped its feet into the M&A market with a related $31 billion bid for U.K. satellite operator Sky, investors have signaled they don’t want to go there—Comcast has lost nearly a quarter of its value on Wall Street since that time.
And if headwind from investors, Disney and the DOJ wasn’t enough, there’s also the Fox board, approval from which is, you know, kind of important.
Forget the somewhat acrimonious history between Roberts and Fox’s far-right chieftain, Chairman Rupert Murdoch. The Fox board is worried that Comcast—which was famously denied a merger with Time Warner Cable three years ago—can’t get the deal past regulators.
“Among the issues discussed by the 21CF board were the more difficult set of regulatory issues raised by a potential strategic transaction with Comcast, as compared to Disney,” Fox said in a filing to the Securities Exchange Commission this week.
Then there’s the fact that Fox board appears to favor Disney stock.
“Disney has the advantage of having access to a currency that appears to be favored by the Murdoch family, which gives the company more degree of freedom relative to Comcast,” Barclays noted.
For its part, Barclays said that Comcast may not want to back down just yet. For one, driving up Disney’s leverage will help it in its related quest to beat the media company out for Sky.
But Disney has the recourse of finding outside partners, too.
“A solution to this from Disney's perspective could be to push multiples higher and make its stock more attractive to Fox shareholders by bringing in a third party from the technology industry,” Barclays added.
Certainly, as Roberts and his crew work the phones and the numbers up high in the Philadelphia skyline, it ain't over. Expect Comcast to come back with something. But more and more, it looks like the next step after that will be kicking the tires on another media company not being sought out by Disney--say, Sony Pictures Entertainment.
Wrote Barclays: “Overall, we believe Disney continues to be in a better position to end up with Fox than Comcast, but deal parameters could still be subject to change."