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

[Stripes]

Found the best source:
https://www.sec.gov/Archives/edgar/data/1308161/000119312513338522/d578800dex31.htm
Subject to applicable law and the voting rights of any outstanding series of Preferred Stock and Series Common Stock, each of the shares of Class A Common Stock shall entitle the record holders thereof, voting together with the holders of Class B Common Stock as a single class, to one (1) vote per share only in the following circumstances and not otherwise:
(B) on a proposal to sell, lease or exchange all or substantially all of the property and assets of the Corporation;

Thank you! I deeply appreciate you taking the time to find this! SEC is good enough for me

However, from what I gather it doesn't appear that the Disney-Fox deal would satisfy (B), particularly with regard to "all or substantially all".

"'substantially all' is satisfied if the assets transferred represent at least 90% of the FMV of the net assets and at least 70% of the FMV of the gross assets held by the target immediately prior to the transfer."
http://www.ipbtax.com/publications-23.html

Disney is not acquiring 90% of 21CF's net assets. On a revenue basis, Disney is acquiring roughly 66% of 21CF.

That said, I'm trying to wrap my head around: "(C) on a proposal to adopt an agreement of merger or consolidation in which the Corporation is a constituent corporation, as a result of which the stockholders of the Corporation prior to the merger or consolidation would own less than sixty percent (60%) of the voting power or capital stock of the surviving corporation or consolidated entity (or the direct or indirect parent of the surviving corporation or consolidated entity) following the merger or consolidation."

Like I said, I'm trying to understand it, as it seems that may qualify.

Edit: from what I understand, it seems C is referring to a situation Disney is in, not 21CF, and therefore also wouldn't apply.

I should note this is my understanding of B and C, and I could always be wrong.

 

[Stripes]

Trump DOJ to Comcast, 'public enemy No.1': Not so fast!
https://www.foxbusiness.com/politics/comcasts-potential-fox-assets-bid-faces-antitrust-roadblock

A statement of national unity?

Anyway, I'd say Comcast will heed this when considering whether to make an offer.

Sidenote: I've noticed a definite bias from CNBC and Murdoch-controlled properties for Comcast and Disney, respectively.

 

[Quinnmac000]

Trump DOJ to Comcast, 'public enemy No.1': Not so fast!
https://www.foxbusiness.com/politics/comcasts-potential-fox-assets-bid-faces-antitrust-roadblock

A statement of national unity?

Anyway, I'd say Comcast will heed this when considering whether to make an offer.

Sidenote: I've noticed a definite bias from CNBC and Murdoch-controlled properties for Comcast and Disney, respectively.

Truthfully if At&T deal falls through, Comcast is going to drop Fox but still gun for Sky and try to have Time Warner spin off Warner Bros.

I don't think Comcast really wants all of Fox just Sky, Hulu, the rights to the Rodger and Hammerstein musicals, and certain Fox television titles (mainly the ones they air and the animated shows).

Comcast solely getting Warner Bros while still have majority Sky gives them enough to where not having Fox is okay and its not like they need Turner because they don't need the Channel distribution networks.

 

[Crossfire]

"Comcast is preparing to make its bid for Twenty-First Century Fox's assets in mid-June, sources tell CNBC.
This time, a bid would include protections such as a reverse termination fee, the sources told CNBC."
https://www.cnbc.com/2018/05/09/comcast-prepares-to-bid-on-fox-in-mid-june-sources.html

 

[Stripes]

Truthfully if At&T deal falls through, Comcast is going to drop Fox but still gun for Sky and try to have Time Warner spin off Warner Bros.

I don't think Comcast really wants all of Fox just Sky, Hulu, the rights to the Rodger and Hammerstein musicals, and certain Fox television titles (mainly the ones they air and the animated shows).

Comcast solely getting Warner Bros while still have majority Sky gives them enough to where not having Fox is okay and its not like they need Turner because they don't need the Channel distribution networks.

I can see where you're going, but without Turner, Time Warner is useless to Comcast, for the exact same reason it's useless to AT&T.

Despite all the talk of the deal getting approved, I'm skeptical. The judge was even critical of the Comcast NBCU settlement, requesting even more oversight than even the DOJ. Of course, betting on who's going to win a court battle is a fool's errand.

If DOJ is successful, I expect Time Warner to be scooped up by Silicon Valley, myself.

Edit: corrected a few grammar mistakes that were bugging me

 

[Stripes]

Found the best source:
https://www.sec.gov/Archives/edgar/data/1308161/000119312513338522/d578800dex31.htm
Subject to applicable law and the voting rights of any outstanding series of Preferred Stock and Series Common Stock, each of the shares of Class A Common Stock shall entitle the record holders thereof, voting together with the holders of Class B Common Stock as a single class, to one (1) vote per share only in the following circumstances and not otherwise:
(B) on a proposal to sell, lease or exchange all or substantially all of the property and assets of the Corporation;

As far as the $1.5 billion goes, it only comes into effect if Disney allows Fox to sign on a sale to Comcast, that money doesn't exist otherwise.

As far as debt goes, both Comcast and Disney are low debt/leverage companies.

Comcast probably can take on a $170 billion debt in the short run if they show a path towards paying that down to the <$100 billion range over a 15 year timeframe. It's doable for a corporation that will likely be running over $30 billion a year in operating income after the merger.

Well, I never should've doubted you. I found the answer with absolute certainty.

"The merger with Disney and the separation of certain 21CF assets into a new, publicly-traded traded company, the stock of which will be distributed to 21CF stockholders on a pro rata basis, cannot be completed unless 21CF stockholders, voting together as a single class, approve the combination merger proposal and the distribution merger proposal and the holders of 21CF class B common stock approve the 21CF charter amendment proposals."
https://www.sec.gov/Archives/edgar/data/1001039/000119312518121183/d565472ds4.htm

Which means Comcast will need about 60% of the remaining vote, excluding Murdoch who has entered into a voting agreement with Disney.

 

[Stripes]

James Murdoch isn’t coming to Disney.

A small note about Rich Greenfield and BTIG: Disney/Iger hates them since they downgraded Disney stock. Iger even blocked them on Twitter, and they weren't too happy afterwards. So, don't expect anything positive about Disney from them.

I have read some of Rich's blog posts, and while he makes a few good points, he has an obvious agenda. He also doesn't understand Disney's long-term strategy whatsoever.

 

[seascape]

On paper without thinking the Comcast offer looks better than it actually is. The offer is $32.50 a share. That will not change at all and will be paid at closing which would be 12 to 18 months after agreeing to the deal. Disney's offer of .2745 a share of Disney stock for each share of Fox would be the same if Disney stock were at 118.40.

Disney closed yesterday at 101.68. However its profits are rising and many analysts have a much higher projected price and it only has to rise 16.72 or 16.35%. I expect Disney stock to rise much more than that in the next 18 months. Plus as of today there is no offer from Comcast to pay the 1.5 billion fee to Disney so their offer is actually 58.5 billion.

 

[the.dreamfinder]

A small note about Rich Greenfield and BTIG: Disney/Iger hates them since they downgraded Disney stock. Iger even blocked them on Twitter, and they weren't too happy afterwards. So, don't expect anything positive about Disney from them.

I have read some of Rich's blog posts, and while he makes a few good points, he has an obvious agenda. He also doesn't understand Disney's long-term strategy whatsoever.

Agreed. He doesn’t understand how Disney is different from other media companies as well.

 

[the.dreamfinder]

What happens to these competing deals if we experience a recession in the next 18-24 months?

 

[Rodan75]

A small note about Rich Greenfield and BTIG: Disney/Iger hates them since they downgraded Disney stock. Iger even blocked them on Twitter, and they weren't too happy afterwards. So, don't expect anything positive about Disney from them.

I have read some of Rich's blog posts, and while he makes a few good points, he has an obvious agenda. He also doesn't understand Disney's long-term strategy whatsoever.

At first everyone was jumping around on the excitement of a 'bidding war', but as folks pull back and start thinking through the business impacts as @seascape mentioned, Comcast is beginning to look a little foolish for trying to be so aggressive when they should be focusing on their core businesses.

I still think Comcast will get Sky out of this deal, but even that could turn out to be a Win for Disney. The Premier League rights are back up for auction in 2022, so ESPN could capture those with the savings from not buying a Satellite company in a country with plenty of internet access. There is a reason why Fox lowballed their original offer for Sky.

 

[Quinnmac000]

At first everyone was jumping around on the excitement of a 'bidding war', but as folks pull back and start thinking through the business impacts as @seascape mentioned, Comcast is beginning to look a little foolish for trying to be so aggressive when they should be focusing on their core businesses.

I still think Comcast will get Sky out of this deal, but even that could turn out to be a Win for Disney. The Premier League rights are back up for auction in 2022, so ESPN could capture those with the savings from not buying a Satellite company in a country with plenty of internet access. There is a reason why Fox lowballed their original offer for Sky.

ESPN doesn't have a presence in Europe (they don't own ESPN in UK they just licensed out the name)...so what good would those Premier League rights do? Its not like people here watch Soccer religiously.

 

[Rodan75]

ESPN doesn't have a presence in Europe (they don't own ESPN in UK they just licensed out the name)...so what good would those Premier League rights do? Its not like people here watch Soccer religiously.

They could expand ESPN+. Even if it isn’t ESPN branded, BAMTech gives Disney all of the same non-broadcast DTC distribution options that the streamers have. Not that they have to, but the argument that Disney needs SKY for sports rights or distribution falls flat, the moat on those sports rights is tiny. And Netflix created a path for DTC distribution Regs in lots of regions.

 

[Stripes]

On paper without thinking the Comcast offer looks better than it actually is. The offer is $32.50 a share. That will not change at all and will be paid at closing which would be 12 to 18 months after agreeing to the deal. Disney's offer of .2745 a share of Disney stock for each share of Fox would be the same if Disney stock were at 118.40.

Disney closed yesterday at 101.68. However its profits are rising and many analysts have a much higher projected price and it only has to rise 16.72 or 16.35%. I expect Disney stock to rise much more than that in the next 18 months. Plus as of today there is no offer from Comcast to pay the 1.5 billion fee to Disney so their offer is actually 58.5 billion.

Yep, long-term Disney's offer is undoubtedly the better option for shareholders. I presume that 21CF's board will make that case to shareholders, in the event of a Comcast offer. Not to say Disney won't up their bid.

To clarify a few things, Fox owes Disney $1.5 billion if Fox's board withdraws their recommendation. Also, the Murdoch Family Trust entered an agreement with Disney which states that, as long as the board keeps their recommendation, the Murdochs must vote for the Disney deal, and if they feel they don't have the votes to approve the deal yet, they must vote for any proposal to delay the vote.

 

[seascape]

Yep, long-term Disney's offer is undoubtedly the better option for shareholders. I presume that 21CF's board will make that case to shareholders, in the event of a Comcast offer. Not to say Disney won't up their bid.

To clarify a few things, Fox owes Disney $1.5 billion if Fox's board withdraws their recommendation. Also, the Murdoch Family Trust entered an agreement with Disney which states that, as long as the board keeps their recommendation, the Murdochs must vote for the Disney deal, and if they feel they don't have the votes to approve the deal yet, they must vote for any proposal to delay the vote.

An interesting thing to watch for is the Sports Betting case the Sumpreme Court will issue. According to the newspapers the decision could come soon, before the AT&T case. If it does, it will be interesting to see how much Disney stock goes up because of ESPN. I just cant see why any Fox stockholder would ever vote for Comcast over Disney.

Even if money is very important so is history and customer service and as someone who has enough money and cares more about the future and people, I could never ever support a company as bad as Comcast even if they have one good division. The rest of the company only cares about money and power. They also hate unions as their animation studios under pay their employees and keep the unions out and there Florida parks also keep the unions out.

 

[Stripes]

Even if money is very important so is history and customer service and as someone who has enough money and cares more about the future and people, I could never ever support a company as bad as Comcast even if they have one good division. The rest of the company only cares about money and power. They also hate unions as their animation studios under pay their employees and keep the unions out and there Florida parks also keep the unions out.

While I agree, Comcast proposal of all-cash makes their bid all about money.

It’s really as simple as this: if you’re in Fox’s stock for the long-haul go with Disney, if you want to make a quick buck, go with Comcast.

I hope enough investors have the sense to go with the former.

Not sure if this has been posted, but here's a good interview with Iger about the acquisition, worth a watch:

 

[AnotherDayAnotherDollar]

This is a crazy debate. Disney will not buy Marvel themepark rights from Universal. They may require Universal to pay to remove all Simpson lands just like they will have to do with Marvel in Japan in a few years. There is however a bigger issue for Universal fans to think about. Tax reform set a limit on interest deductions a company can take. Universal, if they buy Sky will have to add 31 billion dollars of debt. This is on top on the several billion dollars they have been adding each year. If they do buy Sky it most likely will reduce their ability to borrow money and write off the interest, thus forcing them to reduce spending on theme parks and If they have to spend money replacing the Simpson lands on both coasts and Marvel in Japan that is clearly going to slow down other projects.

I have heard it more than once that the Marvel theme park rights expire in Japan in a few years. However, I see no evidence of that. Can you show me where you've seen this and when does it expire over there?

How long do you two think the contract for use of the IP is???
Nothing changes - (for the umpteenth time...) Universal will continue to use the IP til the end of the contract which is many years in the future so yes, it is a very good use of the money.

I have heard the contract for the theme park rights for the Simpsons runs out in mid 2020s, but I'm not sure. The only ones I'm certain about are Marvel in Orlando (perpetuity as long as contract is in good standing. I thought it was the same for Japan, but hear otherwise), Dr. Seuss worldwide (perpetuity as long as the contract is in good standing), and Harry Potter (2029 after Universal has a couple of 5 year extension options in 2019 and 2024).

Obviously they will have to pay cash for the outstanding 39% of SKY (which I said in my initial comment), I'm just saying that Comcast has the ability to use the Marvel rights (as well as 30% of Hulu) as additional leverage in a deal.

Honestly, this is likely the only opening Disney will have to get the Marvel rights back from Universal (not just park but also Hulk/Namor). As has been stated before many times; there is no reason for Comcast to negotiate Marvel rights with Disney and no reason for Disney to overpay for those rights. SKY and HULU being much larger deal points could instigate discussion.

Agreed. That is the only opening in the foreseeable future for Disney to possibly get any licensing/equity rights that Comcast has for properties they own.

Disney gets 30% of Hulu, Hulk movie distribution rights, any Namor movie rights that Comcast owns, worldwide theme park rights to Marvel characters, unspecified amount of cash
Comcast gets 39% of Sky.

That said, Comcast is okay not owning 100% of Sky as well.

This! I don't think Iger would chase an expensive deal, that hasn't been his MO, he really hasn't overpaid for anything (well, maybe Maker).

I don't think Comcast is going to leverage themselves this much for both Fox and SKY, I think this is more about getting Fox to release it's SKY holdings. That is the play here that makes the most sense. Comcast gets SKY (and maybe Star India - but I think Disney will fight harder for that) and Disney gets the rest per the original agreement. Comcast would have trouble getting a full Fox purchase completed, the Time-AT&T deal doesn't pave the way for a major US internet/TV provider to buy 2 studios.

I don't think Disney will give up Star. I can see them giving up the 39% (or going after the rest of Sky) if they get what they want from Comcast.

I also don't think Iger will get in a bidding war. He once said that the last 10% (or was it 20?) of a bid is all ego. The price they offered is right, maybe a bit low, but they are not going to dilute the stock more than that.

Truthfully if At&T deal falls through, Comcast is going to drop Fox but still gun for Sky and try to have Time Warner spin off Warner Bros.

I don't think Comcast really wants all of Fox just Sky, Hulu, the rights to the Rodger and Hammerstein musicals, and certain Fox television titles (mainly the ones they air and the animated shows).

Comcast solely getting Warner Bros while still have majority Sky gives them enough to where not having Fox is okay and its not like they need Turner because they don't need the Channel distribution networks.

If this comes to pass:



And the DOJ makes it a requirement for CMSA to divest NBCU before making another big acquisition, then CMCSA wouldn't make a play for WB. Or Lionsgate. Or SPE. Or anyone else. Comcast is not divesting of NBCU.

 

[Quinnmac000]

If this comes to pass:



And the DOJ makes it a requirement for CMSA to divest NBCU before making another big acquisition, then CMCSA wouldn't make a play for WB. Or Lionsgate. Or SPE. Or anyone else. Comcast is not divesting of NBCU.

It depends on what they classify as "big" acquisitions. WB, Lionsgate, SPE on their own are not big acquisitions. TW, Liberty Global, and Sony Corp are big acquisitions.

 

[AnotherDayAnotherDollar]

It depends on what they classify as "big" acquisitions. WB, Lionsgate, SPE on their own are not big acquisitions. TW, Liberty Global, and Sony Corp are big acquisitions.

I disagree. The former are big acquisitions, the latter are mega acquisitions. You're right though, it is subjective.

 

[VJ]

Why on earth would Disney want that?

Because certain people think all Disney cares about are theme parks.