The merger and acquisition market in the media space is red hot at the moment, and recent reports suggest that it could soon get even hotter. Comcast Corporation (Nasdaq: CMCSA) is reportedly considering an effort to outbid Walt Disney Co. ( DIS) for the movie studio and cable TV assets of Twenty-First Century Fox Inc ( FOXA), a move that could trigger a bidding war for Fox.
According to the Wall Street Journal, a previous bid by Comcast for Fox’s assets was rejected by Fox not because of the price of the bid, but because of concerns regulators would block the merger. The Wall Street Journal now reports that Comcast’s original offer for Fox’s assets was in the low $60 billion range, about 15 percent higher than Disney’s $52.4 billion bid that was accepted in December.
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Now, people familiar with the situation say Comcast is considering taking another run at Fox by outbidding Disney. The news had Fox shares trading higher by more than 2 percent on Monday morning.
Ironically, a potential Comcast-Fox deal could hinge on the fate of another blockbuster media deal. CNBC reported last week that Comcast may be more likely to take another shot at a Fox deal if the merger between AT&T ( T) and Time Warner ( TWX) is ultimately approved. AT&T will have to defend the $85 billion deal in court after the Justice Department decided to sue to block the deal on antitrust grounds.
But even though Comcast may come back with an aggressive bid for Fox’s assets, Rosenblatt Securities analyst Alan Gould says Disney will not lose a bidding war without a fight.
“We believe control of Hulu and Fox’s international assets, especially Sky’s European and Hotstar’s Indian direct-to-consumer assets are strategically critical for Disney’s planned entertainment streaming product, and Disney would likely counter if Comcast were to bid,” Gould says.
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“We don’t know if Comcast will indeed bid, but at a minimum, we would think the prospects of a competitive bid should reduce the arbitrage discount investors are putting on Fox.”
The current value of the all-stock Disney bid is in the low $40s per share, and Comcast’s reported bid for Fox is valued at around $46 per share.
KeyBanc has a “buy” rating and $43 price target for FOXA stock.
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Comcast Corporation (CMCSA) and Walt Disney Co. (DIS) Poised for Battle originally appeared on usnews.com
