Comcast Ordeal NOT over

[Pat X]

I know we were all excited yesterday about COmcast not willing to raise their offer, but I have read today that they are not going away exactly. They are possibly waiting for Disney's stock to go down to match their original offer which will make their bid more attractive....so they haven't given up unfortunately.

Although this article from The Street had some interesting points:

"The bottom line is the value of Comcast's bid and whether Disney shareholders feel they're getting their money's worth. Considering that private equity market assessments of Disney's value come in near $32 a share and run as high as $38, when a premium for control is included, Comcast will have to raise its bid or the deal is dead. After posting solid quarterly earnings, Disney shareholders may feel the future is brighter as a stand-alone company in the middle of a recovery.

"We don't see how [Disney's] board takes a price in the $30-to-$35 range, given that the stock can go that high or higher on fundamentals," said Drewry.

Ultimately, Disney's management will control the fate of the deal and may try to squeeze a premium from Comcast behind closed doors. Because of the way that Disney's share base is structured, Comcast will have an extremely difficult time getting them to agree by a consent solicitation or proxy battle."


Here's the full article: http://www.thestreet.com/_yahoo/markets/ericgillin/10143986.html

 

[tigsmom]

From Today's NY Times:

February 18, 2004
Comcast Says Offer for Disney Is Final, but Some Doubt It
By GERALDINE FABRIKANT

MCSK">Comcast has repeatedly indicated in talks with investors over the last two days that it has no plans to sweeten its offer for the Walt Disney Company, and many of them seem certain that the company is playing a waiting game.

Comcast's bid was worth $23.90 a share yesterday, or about $50 billion. Shares of Disney continued to run far ahead of the offer price, closing yesterday at $26.90, but Comcast is betting that Disney's stock will fall below the bid price as time passes and no new bidder emerges.

Of the most likely candidates to consider competing bids, Viacom has already told investors and analysts that it is not interested, and Time Warner, just coming out of its ill-fated union with America Online, seems unlikely to take on another megamerger.

Yesterday, it looked as if Comcast's patience could pay off. Disney's shares fell 2 cents while Comcast rose 85 cents, to $30.75.

But if the gap does not close significantly, Comcast may well bid more, analysts said.

They were quick to add, however, that Comcast would be very disciplined in not offering more than one share of its stock for each share of Disney because any higher offer would leave Comcast with less than 50 percent of the combined company. Its current offer is for 0.78 share of Comcast for each Disney share.

"I think Comcast will have to come up with another offer,'' which could include a cash component, said Dennis Leibowitz, who heads Act II Partners, a hedge fund that specializes in media. "But I believe they'll try to increase the bid with cash because of the potential dilution in issuing shares, which would worry their shareholders. And cash would assure Disney shareholders of an acceptable value regardless of the share price of Comcast stock."

Some Disney shareholders say that any offer will have to include some cash. Comcast has indicated that it will generate about $2 billion of free cash flow this year, after years of investing its cash in cable. Free cash flow provides money to pay dividends, buy back shares and make strategic investments for cash.

"Disney had $1.8 billion of free cash flow last year," said Bob Olstein, manager of Olstein Financial Alert Fund, whose funds own a million shares of Disney. "Comcast does not have the same record."

Although Comcast has said privately that it has no plans to add cash to any offer, analysts note that it could probably put up as much as $8 billion, either by borrowing money or selling some assets. Among other holdings, it has $1 billion in shares of Liberty Media and stakes in Time Warner Cable and Time Warner, although those interests are not as liquid as the Liberty Media holding.

For now, the outcome of Comcast's overture is uncertain. After all, it is not unusual for the price of a target company's stock to surpass the bid price. Peter Schoenfeld, who heads the hedge fund P. Schoenfeld Asset Management, noted that PeopleSoft traded at a premium to the bid from Oracle. Oracle has since raised its offer, although the deal is caught up in antitrust issues. He also noted that TRW's stock ran ahead of Northrop Grumman's bid. Northrop raised its offer several times before the deal closed.

"What is uncommon in the Comcast bid is that the 9 percent premium offered was so low and was wiped out so quickly," Mr. Schoenfeld said.

In some cases, however, the premium was not much larger than that in Comcast's offer for Disney. The J. P. Morgan bid for Bank One offered a premium in the low teens, but J. P. Morgan stock held up because Wall Street liked the deal.

A hedge fund manager who spoke on the condition of anonymity noted that Comcast has failed to convince investors that it could run Disney much more successfully than its chief executive, Michael D. Eisner.

Indeed, several media industry executives said they thought that Comcast might have miscalculated in offering a relatively small premium.

"Comcast may not have figured that its investors would get so concerned so fast that Comcast might end up overpaying,'' one longtime media expert said. And a top media executive, who spoke on the condition of anonymity, said he thought that Comcast was late in making a bid for Disney.

"Disney can now argue that it is getting straightened out, that its earnings are up and its stock is up. And besides, people still believe there may be another offer."


I don't think this is over by any means. There are a few good articles in today's WSJ, but I don't have access to it on line (nor do I have a scanner). Basically everyone says the same...Wait & see what comes next.

 

[Shaman]

Was there ever a doubt...

The Muppets deal is an example of Disney trying to defend itself...

Right now, disney stock is down .12, at 26.78....but Comcast is also down at this point in time....(CEO replacement can give Disney stock a well needed boost)..... :animwink:

Only time will tell what happens....