News Disney and Fox come to terms -- announcement soon; huge IP acquisition

[Rodan75]

Comcast's btoadband service has been extremely profitable but that is because it was built on the back of the video service. Take away TV and have to add the costs needed to provide wireless 5G at the end and Comcast needs to increase their capital exposure dramatically and with more competition and lower margins. Therefore if Comcast increases its offer to buy Fox much more it will have all the problems analysts say AT&T has with its 250 billion debt. Put it this way, if Comcast were to pay $50.00 a share for Fox and $23 billion for the 61% of Sky it would add $116 billion in new debt and $14 billion in assumed Fox debt. That is $140 billion dollars in new debt. Would it be possible for Comcast to pay the interest? Yes but it would take years and require Dividends to be but along with stock buy backs. Is this good for the stockholders? It depends if they keep it for more than 30 years. However it is very bad news for Universal themeparks because they could not afford to invest at the current rate and that is very bad.

In fact if you look at themeparks as an investment and look at how Six Flags is going with its stock now up $72.68 with a market cap of 6.1 billion, its killing it. They have new membership plans and are growing with new parks in the US and 11 gates being built in China. Yes, they are not at the quality of Disney or Universal but they attract the middle class customers that neither Disney nor Universal care about. Disney and Universal only care about the top 10%. If you don't believe me look at both Disney and Universal ticket prices and advertising. They want vacationers to spend thousands for a week. They want the guests to stay on property, eat, go to the parks and never leave. Is it fun? Yes but the average person can't afford it but they can afford a Six Flags or Cedar Fair vacation. In fact Hilton just announced a new hotel to be built at Great Adventure in NJ right next to the park and new Geat Adventure sports complex.

Shareholders may not have much control over Roberts, but incapacitating the company with debt, when they already control a successful vertical slice of entertainment is sure to invite class action lawsuits. And as we are seeing with CBS, protectionist corporate charters may not be as invincible as originally thought. (I think the Redstones will win that, BTW).

The analysts who are now saying that Comcast and Disney may split the baby, are either seeing some inside discussions, or trying to disuade Roberts from going full Captain Ahab.

 

[Twilight_Roxas]

Comcast already spark multiple controversies like increasing there bills, dropping there internet connection on purpose, terrible costumer services, and violated multiple fcc laws that Comcast is label the worst & hated company in America.

 

[SorcererMC]

I'm just skeptical of what his horizon here is.

Per Disney's Schedule 14A Proxy Statement, Iger now has a 5-year consulting period after he ends his tenure as Chairman/CEO in 2021.
(It had previously been 3 years).

 

[Stripes]

Shareholders may not have much control over Roberts, but incapacitating the company with debt, when they already control a successful vertical slice of entertainment is sure to invite class action lawsuits. And as we are seeing with Viacom, protectionist corporate charters may not be as invincible as originally thought. (I think the Redstones will win that, BTW).

The analysts who are now saying that Comcast and Disney may split the baby, are either seeing some inside discussions, or trying to disuade Roberts from going full Captain Ahab.

Have you noticed how much the hosts at CNBC bring up splitting Fox up? Generally speaking, the analysts don't bring it up, the hosts do. Almost like they've been told to bring it up...

Just something I've noticed

 

[Indy_UK]

Splitting the assets and working out a deal could work great for both companies.

Give Disney SKY, the missing Marvel, Avatar and Star Wars rights.

Give Comcast everything else including Hulu rights.

I can’t figure why but I think Disney want the legacy FOX IP just to bolster the streaming content.

 

[Twilight_Roxas]

Comcast wants all of it for themselves that's how greedy they are.

 

[Sirwalterraleigh]

I think you underestimate the size of Bob Iger's ego. Multiple people who know Iger have characterized him as a perfectionist, willing to do anything to get what he wants. I also think it would be a mischaracterization to think that Disney would be "heavily in debt" even with added cash to top the Comcast bid.

Assuming Disney would be willing to let Sky go, an additional $13 billion in cash to the Disney deal would raise their anticipated pro forma leverage from 2.2x to 2.75x total debt to EBITDA. That's actually exactly where Comcast is right now. If Comcast were to go forward with their Sky and Fox bids their leverage would soar to 4.25x debt to EBITDA.

Excellent analysis...but I think you’re overestimating just how comfortable Disney is paying huge prices...

Bobs 3 major acquisitions....weren’t really overpayments. Perhaps Pixar a little...but as we see this weekend still very solid.

Marvel has been ridiculous on return.

And Lucasfilm could be but they seriously can’t run it right and tripped all over themselves so far.


The other thing - correct me if I’m often wrong - is all your figures assume the Disney just has to come up to Comcast’s number...but why assume that? That’s a pretty lame-O “bidding war”...

I’m guess it could go 10-20 billion higher...and that makes the mouse soil his knickers.

 

[Sirwalterraleigh]

Comcast wants all of it for themselves that's how greedy they are.

...which all the economists around here call “the will of the free market” when defending Disney’s moves...

There’s a razors edge on that boomerang...”Duck, Mate!”

 

[Sirwalterraleigh]

Splitting the assets and working out a deal could work great for both companies.

Give Disney SKY, the missing Marvel, Avatar and Star Wars rights.

Give Comcast everything else including Hulu rights.

I can’t figure why but I think Disney want the legacy FOX IP just to bolster the streaming content.

The analysts agree with you...but why wouldn’t they? Two closer to monopolizing stocks are always better than one...

But they also seem to think that neither will accept a negotiated peace on this battle.

Probably all or nothing slugfest with a shocking final number...and for FOX?

...seems silly.

And I think Hulu is big...if I recall...one of the competitors has promised a juggernaut streaming standalone service by the end of this year to the street and the stockholders...and it’s not “optional”. They HAVE to stop the bleed on tv money.

Controlling Hulu sure does look attractive as a shortcut, don’t it?

 

[the.dreamfinder]

A hard but necessary read. Even if you have followed GE over the years, it’s still very sad. And worst of all, the CEO most responsible, Welch, isn’t holding the bag. This could be Disney's fate if they acquire the Fox assets. Think long and hard about how this deal could kill the company.
http://money.cnn.com/interactive/news/GE-dismantling-interactive/index.html

 

[Rodan75]

A hard but necessary read. Even if you have followed GE over the years, it’s still very sad. And worst of all, the CEO most responsible, Welch, isn’t holding the bag. This could be Disney's fate if they acquire the Fox assets. Think long and hard about how this deal could kill the company.
http://money.cnn.com/interactive/news/GE-dismantling-interactive/index.html

This feels more like where Comcast and AT&T are headed. Disney doesn’t have a lot of debt compared to their peers. But this is likely why splitting the baby is the most reasonable outcome.

Disney would give up distribution SKY and Star and maybe half of the RSNs and take the rest. I really do think Disney wants the IP and not necessarily Distro.

 

[Stripes]

Excellent analysis...but I think you’re overestimating just how comfortable Disney is paying huge prices...

Bobs 3 major acquisitions....weren’t really overpayments. Perhaps Pixar a little...but as we see this weekend still very solid.

Marvel has been ridiculous on return.

And Lucasfilm could be but they seriously can’t run it right and tripped all over themselves so far.


The other thing - correct me if I’m often wrong - is all your figures assume the Disney just has to come up to Comcast’s number...but why assume that? That’s a pretty lame-O “bidding war”...

I’m guess it could go 10-20 billion higher...and that makes the mouse soil his knickers.

Now that Comcast is in it, I think they'd be willing to spend a hefty penny.

That said, at some point these assets just become too expensive. AT&T bought Time Warner for about 11x adjusted Enterprise Value to EBITDA, and almost every analyst thought that was too much for media assets. Disney's 8.3x was a steal, Comcast's bid puts it at 9.7x, which is quite reasonable. I don't think either company is willing to go much higher. If you look at Comcast's prior acquisitions all of them have been right around there as well.

As much fun as it is to speculate, all we can really do is wait and see

 

[Sirwalterraleigh]

Now that Comcast is in it, I think they'd be willing to spend a hefty penny.

That said, at some point these assets just become too expensive. AT&T bought Time Warner for about 11x adjusted Enterprise Value to EBITDA, and almost every analyst thought that was too much for media assets. Disney's 8.3x was a steal, Comcast's bid puts it at 9.7x, which is quite reasonable. I don't think either company is willing to go much higher. If you look at Comcast's prior acquisitions all of them have been right around there as well.

As much fun as it is to speculate, all we can really do is wait and see

Indeed...there’s a game being played and none of us have sideline passes.

I just don’t like iger’s chances of outdueling Roberts.

Disney probably needs the IP more...but they don’t riverboat gamble and Comcast has to be aggressive in the face of changing technology.

And anyone trusting what a Murdoch says is in for an eggface moment.

 

[Sirwalterraleigh]

A hard but necessary read. Even if you have followed GE over the years, it’s still very sad. And worst of all, the CEO most responsible, Welch, isn’t holding the bag. This could be Disney's fate if they acquire the Fox assets. Think long and hard about how this deal could kill the company.
http://money.cnn.com/interactive/news/GE-dismantling-interactive/index.html

Welch is the prototype “yay! Big business” clown who was respected as he destroyed what made business stable in the mid 20th century.

Your typical “free market knows...” type.

Neutron jack....lessons should be learned from him...but won’t be.

Immelt wasn’t a prince either.


GE reminds me of sears, Kodak, etc...Dow 30 behemoth types that will disappear into the dust.

Others can follow if they don’t understand that their needs to be quality and reinvestment...especially in the pee ant, “burden” employees

 

[HauntedMansionFLA]

Indeed...there’s a game being played and none of us have sideline passes.

I just don’t like iger’s chances of outdueling Roberts.

Disney probably needs the IP more...but they don’t riverboat gamble and Comcast has to be aggressive in the face of changing technology.

And anyone trusting what a Murdoch says is in for an eggface moment.

What does Disney do with the 1.5 billion penalty if Fox goes with another offer?

 

[Stripes]

Indeed...there’s a game being played and none of us have sideline passes.

I just don’t like iger’s chances of outdueling Roberts.

Disney probably needs the IP more...but they don’t riverboat gamble and Comcast has to be aggressive in the face of changing technology.

And anyone trusting what a Murdoch says is in for an eggface moment.

Also, just to highlight how expensive Pixar was: Disney spent a whopping 32x Pixar's EBITDA at the time to acquire the company! They obviously spent it well, but yowza!
https://www.sec.gov/Archives/edgar/data/1001039/000119312506012078/d425.htm

 

[Quinnmac000]

Also, just to highlight how expensive Pixar was: Disney spent a whopping 32x Pixar's EBITDA at the time to acquire the company! They obviously spent it well, but yowza!
https://www.sec.gov/Archives/edgar/data/1001039/000119312506012078/d425.htm

Iger despite being a liberal had his company operate extremely conservatively in regards to not taking any real risks. None really diversified Disney's portfolio nor were any of them failing. So, with those deals being successful I can see why people are letting stuff go. Pixar was something they already could fold easily into their company with no hiccups. Same thing with Marvel and Lucasfilms.

This purchase if it goes through for FOX is very much going to test Disney's ability to integrate a much larger entity into their own company which Comcast already did with an actual failing company (NBCUniversal was the lowest grossing box office in addition to the lowest ranked broadcasting company). With Dreamworks Animation, they are also doing the same thing, a once dead company is thriving in toy sales in addition to the TV shows they are creating.

I forsee huge issues as Disney in and of itself, is going to run back into the same problems it faced under Iger which was....certain divisions got way too bloated. They wanted Fox to increase their mature film division like MIramax back but they didn't leverage Miramax, Touchstone, etc while they were under Iger. Heck they didn't even utilize Dreamworks Pictures properly hints why Speilberg was like bye Felicia I"m done after the BFG. Fox animation isn't going to stay for anti-trust reasons. So all that stuff and Blue Sky is going bye bye.

Owning Sky isn't going to enhance their ability to advertise their product because Disney already has a pretty big relationship with Sky already, they would just now own the company and have to be a cable distributor and all the issues that can arise with being that. Star would only be beneficial to Disney if they actually plan to get in Bollywood production, as Hollywood films don't do as well there.

Fox Network Group Asia doesn't really enhance Disney's reach because Disney already has channels in every major East Asian country so there is another loss and certain US shows that haven't been purchased for international viewing weren't purchased for a reason.

I just don't see this as a win for Disney with the exception of Hulu and maybe the RSN to provide ESPN a safety net. The IPs are iffy anyways.

 

[Sirwalterraleigh]

What does Disney do with the 1.5 billion penalty if Fox goes with another offer?

Pays it to the Chinese government for stuff none of us will ever see??

 

[Sirwalterraleigh]

Also, just to highlight how expensive Pixar was: Disney spent a whopping 32x Pixar's EBITDA at the time to acquire the company! They obviously spent it well, but yowza!
https://www.sec.gov/Archives/edgar/data/1001039/000119312506012078/d425.htm

But...in terms of real money - a much smaller outlay

 

[Sirwalterraleigh]

Iger despite being a liberal had his company operate extremely conservatively in regards to not taking any real risks. None really diversified Disney's portfolio nor were any of them failing. So, with those deals being successful I can see why people are letting stuff go. Pixar was something they already could fold easily into their company with no hiccups. Same thing with Marvel and Lucasfilms.

This purchase if it goes through for FOX is very much going to test Disney's ability to integrate a much larger entity into their own company which Comcast already did with an actual failing company (NBCUniversal was the lowest grossing box office in addition to the lowest ranked broadcasting company). With Dreamworks Animation, they are also doing the same thing, a once dead company is thriving in toy sales in addition to the TV shows they are creating.

I forsee huge issues as Disney in and of itself, is going to run back into the same problems it faced under Iger which was....certain divisions got way too bloated. They wanted Fox to increase their mature film division like MIramax back but they didn't leverage Miramax, Touchstone, etc while they were under Iger. Heck they didn't even utilize Dreamworks Pictures properly hints why Speilberg was like bye Felicia I"m done after the BFG. Fox animation isn't going to stay for anti-trust reasons. So all that stuff and Blue Sky is going bye bye.

Owning Sky isn't going to enhance their ability to advertise their product because Disney already has a pretty big relationship with Sky already, they would just now own the company and have to be a cable distributor and all the issues that can arise with being that. Star would only be beneficial to Disney if they actually plan to get in Bollywood production, as Hollywood films don't do as well there.

Fox Network Group Asia doesn't really enhance Disney's reach because Disney already has channels in every major East Asian country so there is another loss and certain US shows that haven't been purchased for international viewing weren't purchased for a reason.

I just don't see this as a win for Disney with the exception of Hulu and maybe the RSN to provide ESPN a safety net. The IPs are iffy anyways.

...couldn’t agree more.

His three big acquisitions were comparative low cost/high yield transactions. Very conservative and not outside their comfort zone at all.

Even bammtech falls into that niche.

Evil Michael took way more chances with ABC and even go.com...not that I want a gambler in charge...but cast member bob hasn’t shown stones to really deviate from obvious type moves at all. Buying Pixar was fate accompli...it’s not like they were seriously gonna sell to anyone else and cut their brand attachment. They just hated Eisner and Roy got rid of him in a near surgical strike. Same can nearly be said of Lucas. Though he makes it quite clear now he has no love of Disney or his fans...

This whole thing to me seems
Like it’s iger attempting to line up stuff for his promised “magic tv”...but I still don’t think he has the foggiest clue. So “yes”...all roads still lead back to the espn problem.

...and that means the annual passes are still gonna go up a lot. Maybe they’ll have “preferred” parking at PoP and charge $75 a day too??