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

[AnotherDayAnotherDollar]

Excluding Murdoch (who would never vote for a cash offer), Comcast would need 60% of the remaining shareholders to vote against Disney. Fox's board will never drop the recommendation for Disney because it's far too risky.

The long-term value of Disney stock presents a tremendous upside to Fox shareholders. At $119 a share, Disney's offer surpasses Comcast's. Only a handful of analysts don't think Disney stock will reach that before the end of the year.

The only thing cash offers is certainty...which isn't so certain considering the antitrust issues. Right now, Comcast should be worried about their NBCU merger considering DOJ is looking to target the merger after AT&T-Time Warner has wrapped up.

Edit: Not to mention, Vanguard, Blackrock, SSga, etc. are all the biggest shareholders in Disney, Fox, and Comcast. I can assure you that these firms (like the rest of Comcast shareholders), do not want Comcast tacking on $100 billion in debt, and therefore will almost certainly vote for the Disney deal.

Depends how much higher, Comcast's offer would be better regardless (i.e. you could sell all the money you made from the Comcast sale and buy it all on Disney stock). Very valid point regarding the biggest shareholders. If Comcast is gonna get that much in debt, there's a big chance I'm dumping my CMCSA shares.

Also, because I have seen it on this thread, allow me to explain why Marvel rights that Comcast has is overrated.

1) Hulk first rights of refusal - not worth a lot to Disney as they can use Hulk whenever they want in a team up movie. I assume it's the same with his supporting characters as well. How much would any sane person pay for such rights? At most Disney will combine this with number 2 and exchange them for any Dreamwork rights they will acquire as part of the Fox acquisition (i.e. VOD and possibly streaming distribution rights up to 2017) and maybe cash. Maybe.
2) Namor rights - It is not clear what Namor rights, if any, Comcast owns. It is widely believed that it is similar to Hulk's as Feige said no one else can produce a Namor movie except Marvel. It stands to reason that the rights here are not worth much either.
3) Orlando theme park rights - This seems to be the biggest one as WDW is the biggest theme park resort in the world and having an MCU presence there would be huge. However, Disney is in expansion mode in parks as hinted by Iger. And they can use Marvel any and everywhere except Orlando and Japan (for Spiderman). Already announced for Disneyland Paris, California, and HK. Marvel lands will be available to be build on more Disneylands as they expand more and more parks around the world. India, 2nd/3rd China resort, Latin America, Middle East, South Korea, 2nd Europe, a 3rd resort in the US (certain to be west of the Mississippi, i.e. Texas), etc. Not worth that much to Disney when you think about it. Certainly not the outlandish figure Comcast would ask for.

Does Disney want them? Yes. Do I want Disney to have them? Yes. Is it a necessity? Not really. It's more like the Oswald IP, if it's there and it's a decent trade, then they will do it otherwise the status quo is fine with them.

 

[mikejs78]

Bi

Saw something that reminded me why the Fox acquisition should be blocked. Disney is the only movie studio to top $3 billion in domestic box office in a year (and this year looks likely to be the second time they do it). So, with this proposed acquisition, the biggest movie studio would get even bigger. This isn't OK in other industries, why would it be OK here?

Big getting bigger isn't enough to block an acquisition. Even biggest getting bigger. Deals are blocked in the US if there is a case that the acquisition will give the buyer the ability to leverage their amassed assets to harm consumers. While Disney would be the biggest studio by a decent amount there would still be several major and minor studios left that could provide content to moviegoers.

 

[mikejs78]

Considering how solo Hulk movies have fared compared to his inclusion in Avengers and Thor, I'm thinking Disney is in no hurry to be able to make another solo Hulk movie.

You're absolutely right on this - I know that this at least was Marvel's thinking a couple of years ago...

 

[Quinnmac000]

Depends how much higher, Comcast's offer would be better regardless (i.e. you could sell all the money you made from the Comcast sale and buy it all on Disney stock). Very valid point regarding the biggest shareholders. If Comcast is gonna get that much in debt, there's a big chance I'm dumping my CMCSA shares.

Also, because I have seen it on this thread, allow me to explain why Marvel rights that Comcast has is overrated.

1) Hulk first rights of refusal - not worth a lot to Disney as they can use Hulk whenever they want in a team up movie. I assume it's the same with his supporting characters as well. How much would any sane person pay for such rights? At most Disney will combine this with number 2 and exchange them for any Dreamwork rights they will acquire as part of the Fox acquisition (i.e. VOD and possibly streaming distribution rights up to 2017) and maybe cash. Maybe.
2) Namor rights - It is not clear what Namor rights, if any, Comcast owns. It is widely believed that it is similar to Hulk's as Feige said no one else can produce a Namor movie except Marvel. It stands to reason that the rights here are not worth much either.
3) Orlando theme park rights - This seems to be the biggest one as WDW is the biggest theme park resort in the world and having an MCU presence there would be huge. However, Disney is in expansion mode in parks as hinted by Iger. And they can use Marvel any and everywhere except Orlando and Japan (for Spiderman). Already announced for Disneyland Paris, California, and HK. Marvel lands will be available to be build on more Disneylands as they expand more and more parks around the world. India, 2nd/3rd China resort, Latin America, Middle East, South Korea, 2nd Europe, a 3rd resort in the US (certain to be west of the Mississippi, i.e. Texas), etc. Not worth that much to Disney when you think about it. Certainly not the outlandish figure Comcast would ask for.

Does Disney want them? Yes. Do I want Disney to have them? Yes. Is it a necessity? Not really. It's more like the Oswald IP, if it's there and it's a decent trade, then they will do it otherwise the status quo is fine with them.

NBCUniversal already has distribution back for all the dreamwork films. So that option is already gone.

Namor is full character appearance rights split between Comcast, Legendary, and a few other agencies. That's why he wasn't in Iron Man 2 despite the easter egg nor has been seen in any films so far despite multiple people wanting to bring him into the fold.

 

[AnotherDayAnotherDollar]

NBCUniversal already has distribution back for all the dreamwork films. So that option is already gone.

Namor is full character appearance rights split between Comcast, Legendary, and a few other agencies. That's why he wasn't in Iron Man 2 despite the easter egg nor has been seen in any films so far despite multiple people wanting to bring him into the fold.

NBCU has distribution back for all dreamwork films for physical media. All evidence points to Fox having distribution rights for VOD (i.e. google play, playstation store, itunes, amazon video, etc. Those movies are under "Fox" for google play/playstation store or Dreamworks on Amazon for example. They are not under NBCU anywhere.). I very specifically referred to VOD and possibly streaming because I know the rights to physical media for Dreamwork movies are with NBCU. I don't know who has streaming rights to those films and I doubt anyone outside of people who are insiders would know.

I don't think what you said about Namor is that much different than what I said.....but you made me google it and it seems like we got some new info on Namor rights from Feige because of IW. It is still a mess, maybe more complicated than Hulk (though IGN claims it is just like the Hulk rights http://www.ign.com/articles/2018/04...ss-addresses-namors-complicated-rights-status ). Nobody knows the exact tangled that is when it comes to Namor movies rights except insiders. Point still stands. It's small and irrelevant potatoes to Disney. They don't need it, especially if they get the full Fox slate of characters. No one outside of the hardcore audience knows who the heck Namor is.

 

[happycamperuni]

Comcast would probably only bid for the Fox assets if all 3 of the following are true:

1) they could present an offer that makes the Murdochs whole after taxes compared to the Disney offer

2) their offer includes a huge premium to the non-Murdoch shareholders compared to the Disney offer

3) AT&T wins their merger lawsuit in pretty overwhelming terms (i.e. limited restrictions on their purchase of TimeWarner: at most arbitration requirements for Turner carriage negotiations with other providers).


If those 3 are all true, then Comcast would make an offer. As to what the Murdochs would do, they'll go to Disney and see if Disney would match or exceed that offer.

I'd be skeptical that they'll try to force the Disney offer given that Comcast could be offering up to 20% higher to the non-Murdochs (after taxes); at that point the premium is too large, so Disney would have to up their offer.

Either way, this discussion really only has merit if all 3 of those points above are true in mid-June. If any of those 3 aren't really true, then Comcast simply won't bid for Fox's assets. They might just aim for Sky only.

 

[the.dreamfinder]

Bi

Big getting bigger isn't enough to block an acquisition. Even biggest getting bigger. Deals are blocked in the US if there is a case that the acquisition will give the buyer the ability to leverage their amassed assets to harm consumers. While Disney would be the biggest studio by a decent amount there would still be several major and minor studios left that could provide content to moviegoers.

The underacknowldeged problem here is the ways in which Disney can, and has, used its clout to harm competition from other studios and theaters to its advantage. Take for example their hard ball negotiations with the exhibitors. Since 2013 or so, Disney has kept pushing exhibitors for higher and higher shares of the box office gross; they typically split it 50-50, but it’s now 60-40. Then, with “The Force Awakens”, TWDS started to make demands for theaters to play TFA for weeks with the largest auditoriums blocked out or else it wouldn’t be screened at all. Theater owners used to have more descretion on how they would program their auditoriums and how long they would play a film for. With Disney-Fox and the market power they posses, which will likely be immune to cyclical downturns, they will effectively control exhibitors in the US without needing to own a single multiplex.

 

[Lensman]

The underacknowldeged problem here is the ways in which Disney can, and has, used its clout to harm competition from other studios and theaters to its advantage. Take for example their hard ball negotiations with the exhibitors. Since 2013 or so, Disney has kept pushing exhibitors for higher and higher shares of the box office gross; they typically split it 50-50, but it’s now 60-40. Then, with “The Force Awakens”, TWDS started to make demands for theaters to play TFA for weeks with the largest auditoriums blocked out or else it wouldn’t be screened at all. Theater owners used to have more descretion on how they would program their auditoriums and how long they would play a film for. With Disney-Fox and the market power they posses, which will likely be immune to cyclical downturns, they will effectively control exhibitors in the US without needing to own a single multiplex.

I read that Disney is pretty unique in their negotiating power right now because they're mostly producing hits. The article I was reading said that most other studios don't have this negotiating power because exhibitors would "get back" at them when negotiating for distribution rights for their supposed duds. So arguably, Disney could have less leverage with their purchase of Fox because they'll have to distribute more duds.

I'm not arguing this point, I'm just repeating what I just read.

 

[Rodan75]

Comcast would probably only bid for the Fox assets if all 3 of the following are true:

1) they could present an offer that makes the Murdochs whole after taxes compared to the Disney offer

2) their offer includes a huge premium to the non-Murdoch shareholders compared to the Disney offer

3) AT&T wins their merger lawsuit in pretty overwhelming terms (i.e. limited restrictions on their purchase of TimeWarner: at most arbitration requirements for Turner carriage negotiations with other providers).


If those 3 are all true, then Comcast would make an offer. As to what the Murdochs would do, they'll go to Disney and see if Disney would match or exceed that offer.

I'd be skeptical that they'll try to force the Disney offer given that Comcast could be offering up to 20% higher to the non-Murdochs (after taxes); at that point the premium is too large, so Disney would have to up their offer.

Either way, this discussion really only has merit if all 3 of those points above are true in mid-June. If any of those 3 aren't really true, then Comcast simply won't bid for Fox's assets. They might just aim for Sky only.

I don’t think the AT&T TW results are going to drive much here. The gov is already requesting an extension of NBCUni conditions since Comcast broke many of the original conditions, which Disney could use against Comcast if things get interesting with SKY. No way they get approval for another studio and cable channels without significantly more resources going back to New Fox.

 

[Rodan75]

The underacknowldeged problem here is the ways in which Disney can, and has, used its clout to harm competition from other studios and theaters to its advantage. Take for example their hard ball negotiations with the exhibitors. Since 2013 or so, Disney has kept pushing exhibitors for higher and higher shares of the box office gross; they typically split it 50-50, but it’s now 60-40. Then, with “The Force Awakens”, TWDS started to make demands for theaters to play TFA for weeks with the largest auditoriums blocked out or else it wouldn’t be screened at all. Theater owners used to have more descretion on how they would program their auditoriums and how long they would play a film for. With Disney-Fox and the market power they posses, which will likely be immune to cyclical downturns, they will effectively control exhibitors in the US without needing to own a single multiplex.

I think they are going to have to agree with some conditions here, but nothing insurmountable.

 

[Quinnmac000]

I don’t think the AT&T TW results are going to drive much here. The gov is already requesting an extension of NBCUni conditions since Comcast broke many of the original conditions, which Disney could use against Comcast if things get interesting with SKY. No way they get approval for another studio and cable channels without significantly more resources going back to New Fox.

Comcast allegedly broke conditions....never proven, no justice department complaints nor have the people claiming it taken Comcast to court and won

As you can imagine, Comcast doesn’t see things the same way. DSL Reports has a statement from the company laying out its position. “There is no credible basis to pursue an extension or modification of the consent decree or conditions,” Comcast said. “For nearly seven years, Comcast has met or exceeded all of the commitments and obligations under the NBCUniversal transaction. We have filed six annual compliance reports with the FCC setting forth in detail our exemplary compliance track record, none of which has been challenged or objected to by the Commission or any third parties, including by any member of Congress. The DOJ, which has received substantial information about our compliance with the consent decree, has never pursued any enforcement action against us.”

Under the terms of the merger conditions, Comcast-NBCU has to go to arbitration when disputes arise over the pricing it charges for its “must-have” programming. Small cable companies and online video services claim that Comcast-NBCU is already acting in an anti-competitive way with regards to availability and pricing of channels; they worry that things are only going to get worse when the arbitration provisions expire.

http://bgr.com/2017/12/20/comcast-nbc-pricing-unfair-doj-merger/

 

[Stripes]

Comcast allegedly broke conditions....never proven, no justice department complaints nor have the people claiming it taken Comcast to court and won

Many small cable companies have made countless complaints to the FCC.

Look dude, it's Comcast. Chances are they're guilty as sin. They've lied to my face I don't know how many times.

 

[Quinnmac000]

Many small cable companies have made countless complaints to the FCC.

Look dude, it's Comcast. Chances are they're guilty as sin. They've lied to my face I don't know how many times.

The Universal Declaration of Human Rights, article 11, states: "Everyone charged with a penal offence has the right to be presumed innocent until proved guilty according to law in a public trial at which he has had all the guarantees necessary for his defence." And due to supreme court rulings, corporations are people now so....

 

[Stripes]

The Universal Declaration of Human Rights, article 11, states: "Everyone charged with a penal offence has the right to be presumed innocent until proved guilty according to law in a public trial at which he has had all the guarantees necessary for his defence." And due to supreme court rulings, corporations are people now so....

Just saying.

Can you imagine trying to find an impartial jury in a lawsuit against Comcast?

 

[Lensman]

I think they are going to have to agree with some conditions here, but nothing insurmountable.

It's unclear to me whether there could be any consumer harm on the either film production or film distribution. For film production, the argument would have to be that the combined Fox/Disney would control too much of the capital and production facilities and would harm consumers by cornering the market on producing movies. I'd like to see the case for that. For film distribution, the argument would have to be that Fox/Disney would harm consumers by having too much control over movie theaters. Well, interestingly enough, this is the very thing that the Paramount Decrees were designed to prevent. As one of the consequences, film distribution companies are not allowed to do block booking, the practice of selling multiple films to a movie theater as a block. They are only allowed to negotiate the release of individual films. As this ban was designed to prevent the power of a syndicated collusion of every major studio against theater owners (after studios were also barred from owning theaters), I suspect that arguments that an individual studio, no matter how successful, would be able to use their power to prevent the distribution of competing studio's films would face a high bar.

Besides, Disney may be dominating year-to-date 2018 market share, and probably will continue to despite their releasing Solo in a few weeks, but there is Jurassic World: Fallen Kingdom coming up. Besides, antitrust would have to show how the mergers would harm consumers by making it harder for someone to make a $100-$200 million film (or more importantly a small independent film) or for competitors to produce a blockbuster. Simply being successful isn't enough to be labeled anti-competitive, it has to be shown how your success prevents others from being successful in the same business.

Just my opinion based on my reading of the matter. I suspect there are other areas of the transaction that might be more fruitful for antitrust.

But why are we speculating about this aspect? Just because we can? Ha! It's in our nature, isn't it? Like the scorpion.

Just saying.

Can you imagine trying to find an impartial jury in a lawsuit against Comcast?

Ha! They'd have to move the trial to a city not served by Comcast!

 

[seascape]

I can't understand the views of some of posters here. Comcast may offer 60 billion for Fox. That is 32.50 a share payable at closing. While today that looks like more than Disney's offer, it is not. Disney if offering .2745 share of Disney Stock for every share of Fox stock. Disney stock should be higher next June than it is now. As of yesterday's close that would be 28.25 a share from Disney. However if Disney stock increases to 118.40 the Disney offer would be a tiny fraction over 32.50. Further if CFRA Capital is correct and Disney hits 130.00 a share the offer would be 35.68 a share or 9.8% more than Comcasts offer and Comcast would have to increase their offer.

All this shows is offers have to be looked at in their entirety and not at a static time. I am also aware that Disney stock could go down but that is unlikely with sports betting and themeparks running at full steam. I think CFRA is correct and Disney will be well over 120 in the next 12 months.

 

[Lensman]

I can't understand the views of some of posters here. Comcast may offer 60 billion for Fox. That is 32.50 a share payable at closing. While today that looks like more than Disney's offer, it is not. Disney if offering .2745 share of Disney Stock for every share of Fox stock. Disney stock should be higher next June than it is now. As of yesterday's close that would be 28.25 a share from Disney. However if Disney stock increases to 118.40 the Disney offer would be a tiny fraction over 32.50. Further if CFRA Capital is correct and Disney hits 130.00 a share the offer would be 35.68 a share or 9.8% more than Comcasts offer and Comcast would have to increase their offer.

All this shows is offers have to be looked at in their entirety and not at a static time. I am also aware that Disney stock could go down but that is unlikely with sports betting and themeparks running at full steam. I think CFRA is correct and Disney will be well over 120 in the next 12 months.

It's worth reading the following article on cash vs stock vs other M&A offers:
https://hbr.org/1999/11/stock-or-ca...uyers-and-sellers-in-mergers-and-acquisitions

But mostly, shareholders of the acquired company should not accept an equity offer that is less than a cash offer at current market prices unless they have a belief that the cash offer will not complete. Tax deferral is somewhat of a factor but remember that you could always sell your stock at the offer price and buy the acquiring company stock now, capturing the same risk/reward as the equity offer. In fact, you might be subject to less risk because holding on to the close of the deal you are subject to the risk that the deal falls through and in such cases the acquired company stock typically falls to near the pre-offer price.

 

[seascape]

It's worth reading the following article on cash vs stock vs other M&A offers:
https://hbr.org/1999/11/stock-or-ca...uyers-and-sellers-in-mergers-and-acquisitions

But mostly, shareholders of the acquired company should not accept an equity offer that is less than a cash offer at current market prices unless they have a belief that the cash offer will not complete. Tax deferral is somewhat of a factor but remember that you could always sell your stock at the offer price and buy the acquiring company stock now, capturing the same risk/reward as the equity offer. In fact, you might be subject to less risk because holding on to the close of the deal you are subject to the risk that the deal falls through and in such cases the acquired company stock typically falls to near the pre-offer price.

If the deal were to close in 6 months, I would take the cash. However due to all the regulatory requirements the deal will take 18 months from comcasts offer or about 12 more months for the Disney deal. Also regardless of the AT&T decision there is still a big risk to any Comcast Deal. As a cable distributor owning two major studios would be a problem. The AT&T case defense is that Comcast was allowed to merge so AT&T should be allowed. Then there are those who believe Comcast had violated the terms of their merger. In fact since Comcast did agree to certain behaviours one can question their decision to boost internet speeds for customers who subscribe to all three of their services but refuse to for internet only. Does that look like a company that would treat everyone the same?

Now as I have said all along, I think both mergers are bad for consumers and should be blocked. I also think AT&T should be blocked and that Comcast NBCU should be broken up. Content and Distribution should be kept separate.

 

[happycamperuni]

I don’t think the AT&T TW results are going to drive much here. The gov is already requesting an extension of NBCUni conditions since Comcast broke many of the original conditions, which Disney could use against Comcast if things get interesting with SKY. No way they get approval for another studio and cable channels without significantly more resources going back to New Fox.

DoJ's behavior is based on the assumption that they'll win the AT&T-TW case handily and then be able to impose restrictions on Comcast-NBCU by threatening a lawsuit to break them up under the precedent set by the AT&T-TW case.

But if the case goes the other way, then their reaction will have to be different. I don't see how the DoJ tries to impose heavy restrictions on Comcast-Fox if AT&T is allowed to purchase TW with just arbitration clauses on Turner's negotiations with other distributors. The judge is going to issue a generalizable ruling on vertical mergers which will be applied to all of the other vertical mergers pending right now (like CVS-Aetna) where market share (in any definable market) won't increase as a result of the merger.

Regardless, the market is completely different now in 2018 compared to 2011 when Comcast-NBCU was decided with multiple powerful online content providers. It's just hard for me to see why TW or Fox have a lot of content in a world where YouTube and FaceBook have billions of hours of content constantly being generated and where Netflix and Amazon Prime have over 100 million subscribers each. Even premium content is no longer just controlled by the Big 6 studios.

 

[the.dreamfinder]

Lachlan Murdoch to run New Fox.
https://www.hollywoodreporter.com/news/lachlan-murdoch-named-ceo-new-fox-1112425