As expected, Walt Disney Co (NYSE: DIS) returned fire in its bidding war with Comcast Corp. ( CMCSA), offering $71.3 billon for most of the assets of Twenty-First Century Fox ( FOXA) on Wednesday. The ball is now in Comcast’s court to up its $65 billion bid, but analysts say the potential victory gets a slightly less sweet with each round of bidding.
After initially bidding $52.4 billion for Fox in December, Disney was outbid by Comcast’s $65 billion all-cash offer last week. Disney CEO Bob Iger says Disney’s new $71.3 billion offer is a much safer bet for Fox shareholders than Comcast’s offer. In a conference call with investors on Wednesday, Iger said Disney has been working with regulators for months to ensure a buyout of Fox would be approved.
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“We believe that we have a much better opportunity — both in terms of approval, and the timing of that approval — than Comcast does in this case,” Iger said.
Comcast was reportedly emboldened following approval of the AT&T ( T) buyout of Time Warner ( TWX) earlier this month, but Iger said Comcast is both a cable provider and a broadband provider, which will potentially raise a unique set of antitrust concerns.
Disney sweetened the deal further with its latest offer by allowing Fox shareholders to choose whether they will accept their payment in cash or stock. Comcast’s $65 billion bid is strictly an all-cash offer.
Fox has chosen to postpone a shareholder meeting previously scheduled for July 10, presumably to give the bidding war time to play out fully before holding a deciding vote.
GBH Insights head of technology research Daniel Ives says the aggressive bidding is a clear indication of the value both Disney and Comcast place on Fox’s content.
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“For Disney and Iger, raising its bid above that of Comcast is a smart strategic poker move in our opinion, as this remains the golden assets Iger and Disney crave to catalyze its streaming and content ambitions over the coming years,” Ives says.
Ives estimates Fox could create $2 billion of cost synergies for Disney within the first 18 months following a completed deal, but the financial benefits continue to shrink as Fox’s price tag climbs.
GBH Insights has a “highly attractive” rating and $120 price target for DIS stock.
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Walt Disney Co (DIS) Is in the Driver’s Seat With New Fox Bid originally appeared on usnews.com
