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

[larryz]

Would that be much worse than having him killed by falling off a bridge?

They had to have Kirk die that way so they could use the play on words: "Bridge on the Captain."

 

[WDWTank]

Ive started thinking of this a lot differently. Do we really want this to happen?
Why was tron 3 not made? Because they had so many IPS that it no longer was seen as important (crank out star wars and marvel)
New immersive ride based on an entirely new movie... no we have an ip for that
creative new idea for a movie... no we have ips that we just bought
As much as I love what they did with marvel and star wars (these would both be vastly different without Disney) love it or hate it you wouldn't have all of this star wars goodness if Disney hadn't bought it, we might not even have marvel minus one bad movie every three years.
But do we want them getting new IPs that demand sequels instead of Tomorrowland (love it), Tron 3, pirates of the carribean, lone ranger (I actually liked it too ok)

I’m kind of hoping their bid doesn’t go through.

 

[Kamikaze]

Next couple of days we'll probably see a counterbid from Disney, and then another bid from Comcast.

Looking at the fact that all 3 companies are trading up since the AT&T-TW decision..., investors love this bidding war.

Doubtful. Comcast had to go to the mattresses to make this bid. They maybe have one additional bid if they asked for some leeway in the financing.

Disney might offer slightly more, but they don't need to go up much to meet the value.

Remember that Fox will have to pay the $1.5bn cancellation fee if they go with Fox, so Comcast is really only offering $63.5bn. The difference between stock sales and cash in taxes is roughly 8%, so thats somewhere near $4.5bn on this deal for the investors, meaning the value of the Fox deal is really more like $59bn and Disney's is $54. So if Disney goes to $60bn, they will be offering more. A bidding war isn't likely. Either Disney matches/beats or Comcast gets it. Or Fox just ignores Comcast and takes Disney's original bid.

It’s a sales pitch...and it’s actually hard to argue.

The stock owners don’t typically give a flying bat poo about long term debt...they’re aren’t in it for 30 like grandpa.

What they do care about is cash over stock...

Disney’s stock can’t gain any headwind because of cable concerns and they are massively overcharging (us...to be frank) for all their other product. That ain’t good.

Only person that really matters is Murdoch. He has 39% of the voting shares, so he just needs to convince 12% of the other voting shares (his buddies) to go whichever way he wants. This isn't a hostile takeover, its a sale.

Ive started thinking of this a lot differently. Do we really want this to happen?
Why was tron 3 not made? Because they had so many IPS that it no longer was seen as important (crank out star wars and marvel)
New immersive ride based on an entirely new movie... no we have an ip for that
creative new idea for a movie... no we have ips that we just bought
As much as I love what they did with marvel and star wars (these would both be vastly different without Disney) love it or hate it you wouldn't have all of this star wars goodness if Disney hadn't bought it, we might not even have marvel minus one bad movie every three years.
But do we want them getting new IPs that demand sequels instead of Tomorrowland (love it), Tron 3, pirates of the carribean, lone ranger (I actually liked it too ok)

Tron 2, the last couple Pirates, Lone Ranger, Tomorrowland were all box office failures. Some more than others. The only reason we're getting Tron as a ride is because it exists already.

I loved the idea of 'Tomorrowland' and the movie was actually really good. But you don't build something on top of a failure.

 

[mikejs78]

Only person that really matters is Murdoch. He has 39% of the voting shares, so he just needs to convince 12% of the other voting shares (his buddies) to go whichever way he wants. This isn't a hostile takeover, its a sale.

Not quite. In an acquisition, all class shares are equal, so Murdoch's class advantage doesn't come into play here. I think it was stated earlier in the thread that his voting share will be about 17%...

 

[WondersOfLife]

So I own like... A very small amount of stock in Disney. The cool part about it? I just got this big book/voting papers about the Walt Disney Company acquiring 21st Century Fox. Thought this would be pretty neat to share here. It's a giant book with information regarding the whole thing.

 

[TwilightZone]

Ive started thinking of this a lot differently. Do we really want this to happen?
Why was tron 3 not made? Because they had so many IPS that it no longer was seen as important (crank out star wars and marvel)

I think tron 3 not being made had less to do with new IPs and more with tron 2 failing in the box office and the tron TV series under performing due to the disney XD curse. Star wars and marvel, however are still doing pretty well. Well star wars less so, but it has the nostalgia factor to keep it strong that tron does not really have.

 

[smile]

Comcast has got what stocks crave. It's got electrolytes

welcome to disney, i love you. welcome to disney, i love you. welcome to disney, i love you.

 

[Kamikaze]

Not quite. In an acquisition, all class shares are equal, so Murdoch's class advantage doesn't come into play here. I think it was stated earlier in the thread that his voting share will be about 17%...

The majority of Fox shares traded publicly are class A shares, which have no voting rights. The Murdoch family owns about 39 percent of the class B voting shares, according to the company’s proxy.

https://www.reuters.com/article/fox...chs-with-fox-voting-rights-push-idUSL1N1NJ1RE

Don't know where that other information came from, but it is absolutely not correct. It doesn't matter if its an acquisition or not. If its a non-voting share, you don't get to vote. Thats the whole premise of having different classes.

This is from 2011, but the numbers will still be pretty accurate:

https://www.telegraph.co.uk/finance...52/Top-ten-News-Corp-voting-shareholders.html

The 'revolt' is definite proof that A holders don't matter. If they did, Murdoch would have lost the company in 2011.

 

[mikejs78]

The majority of Fox shares traded publicly are class A shares, which have no voting rights. The Murdoch family owns about 39 percent of the class B voting shares, according to the company’s proxy.

https://www.reuters.com/article/fox...chs-with-fox-voting-rights-push-idUSL1N1NJ1RE

Don't know where that other information came from, but it is absolutely not correct. It doesn't matter if its an acquisition or not. If its a non-voting share, you don't get to vote. Thats the whole premise of having different classes.

This is from 2011, but the numbers will still be pretty accurate:

https://www.telegraph.co.uk/finance...52/Top-ten-News-Corp-voting-shareholders.html

The 'revolt' is definite proof that A holders don't matter. If they did, Murdoch would have lost the company in 2011.

In pretty much every other case, you're right. Except for mergers and acquisitions. SEC rules don't allow for privileged voting classes in that one case - mergers and acquisitions. For all M&As, each share counts as one vote, regardless of share class. From the 20th century Fox / Disney agreement:.

Approval of the combination merger proposal and the distribution merger proposal require the affirmative vote of holders of a majority of the outstanding shares of 21CF class A common stock and 21CF class B common stock entitled to vote thereon, voting together as a single class.

This article (https://www.marketwatch.com/story/comcast-pursues-sky-and-bigger-move-for-fox-assets-2018-04-25) explains it:

Mr. Murdoch and his family have a 39% voting interest in Fox. Their economic interest, which is what would count in a shareholder vote on the Disney-Fox merger, is roughly 17%.

And directly from the SEC (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;

 

[sedati]

I think tron 3 not being made had less to do with new IPs and more with tron 2 failing in the box office and the tron TV series under performing due to the disney XD curse. Star wars and marvel, however are still doing pretty well. Well star wars less so, but it has the nostalgia factor to keep it strong that tron does not really have.

A different Tron 3 is still in development.
Globally, Tron Legacy actually did better than JJ Abram's Star Trek reboot.

 

[Lensman]

Remember that Fox will have to pay the $1.5bn cancellation fee if they go with Fox, so Comcast is really only offering $63.5bn. The difference between stock sales and cash in taxes is roughly 8%, so thats somewhere near $4.5bn on this deal for the investors, meaning the value of the Fox deal is really more like $59bn and Disney's is $54. So if Disney goes to $60bn, they will be offering more. A bidding war isn't likely. Either Disney matches/beats or Comcast gets it. Or Fox just ignores Comcast and takes Disney's original bid.

I think the best number for the percentage ownership of U.S. equity market cap owned by index funds and ETFs is 19%. This is an additional interesting voting bloc for Fox shares because these shareholders will tend to vote for the long term interests of the acquirers in addition to their short-term interest as Fox shareholders. They also probably marginally beneficiaries of an equity exchange that allows this deal to avoid being a taxable event.

What is the definitive answer to whether Murdoch has 19% or 39% of the votes for a merger approval? I see that Mike has definitively answered above that it is 17%.

 

[Stripes]

2) Bob Iger is planning on leaving Disney. If Disney does win the Fox assets, how long is he planning on staying: 5 years at most? There's no way he can just pile a lot of extra cash into this bid and leave Disney heavily in debt for a successor to handle.

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.

 

[seascape]

The more I think about the offers the more I am convinced Disney should offer one share of Disney for every 3 shares of Fox. Any reasonable Fox shareholder would insist on Comcast upping their offer to $50.00 a share cash to win. Disney is easily worth $120.00 a share and I think $130 by the 18 months needed for Comcast to close. At 130 a share 1/3 a share of Disney would be 43.33 with tax advantages. It would require more for taxes and that is why Comcast needs to bid more than Disney to match the true value.

 

[Rodan75]

The more I think about the offers the more I am convinced Disney should offer one share of Disney for every 3 shares of Fox. Any reasonable Fox shareholder would insist on Comcast upping their offer to $50.00 a share cash to win. Disney is easily worth $120.00 a share and I think $130 by the 18 months needed for Comcast to close. At 130 a share 1/3 a share of Disney would be 43.33 with tax advantages. It would require more for taxes and that is why Comcast needs to bid more than Disney to match the true value.

I think Disney may counter with cash. Or a blend of cash and stock to minimize dilution. I think folks are too confident that Comcast has the leverage to match any price. Disney has more room to manuever if it is willing to give up SKY.

What folks don’t always understand is that internet service has less margin than TV services. So the degradation of The Bundle will erode Comcast’s profits quicker than most expect. (A big reason why net neutrality is such a big deal, it creates a revenue stream that matches and exceeds TV margin).

So does Disney counter before Wednesday or do they wait until the board reviews the Comcast offer?

 

[happycamperuni]

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.

I don't think Iger would let the Fox assets go easily, but I'm just skeptical of what his horizon here is.

Brian Roberts can afford to jack up the debt ratio on Comcast as high as he wants because at the end of the day, he can cut buybacks and plow money into bringing down debt for a 8-10 year period.

I think after Disney counterbids, we'll see at least one more Comcast bid.

After that it'll get interesting.

I think Disney may counter with cash. Or a blend of cash and stock to minimize dilution. I think folks are too confident that Comcast has the leverage to match any price. Disney has more room to manuever if it is willing to give up SKY.

What folks don’t always understand is that internet service has less margin than TV services. So the degradation of The Bundle will erode Comcast’s profits quicker than most expect. (A big reason why net neutrality is such a big deal, it creates a revenue stream that matches and exceeds TV margin).

So does Disney counter before Wednesday or do they wait until the board reviews the Comcast offer?

Internet service has much higher margin at least for the next 5-10 years (while there's minimal competition, I don't think 5G will be able to compete with full duplex Docsis 3.1 offering gigabit up/down). Video is where the margins are being crunched, but broadband makes up for it.

Comcast has regularly grown its broadband revenue at a 8-10% rate the past couple of years while video has grown 2-4% (due to cord cutting), and the cost of providing internet is much lower than video (where you have to pay providers for their networks).

That's why Comcast can afford to take on a lot of debt over the next 5-10 years and pay it down with the big payments from broadband.

Timeline wise: I think Fox board determines whether the bid is superior on Wednesday, then Disney has until Wednesday June 27 to counteroffer.

So most likely the bidding will heat up after Wednesday.

 

[mikejs78]

I don't think 5G will be able to compete with full duplex Docsis 3.1 offering gigabit up/down

How do you figure? Docis 3.1 tops out at 1 gps where 5G can reach speeds of 10 gps?

 

[trainplane3]

How do you figure? Docis 3.1 tops out at 1 gps where 5G can reach speeds of 10 gps?

I may be out of date, but LTE-A tops out at 1.5Gbps but no consumer sees anywhere near that. I think most carriers say "can hit 300Mbps" for LTE-A. If 5G can hit 10Gbps, a consumer might see 1Gbps, but I think that'll be a longshot until the networks really get built out.

 

[Stripes]

I don't think Iger would let the Fox assets go easily, but I'm just skeptical of what his horizon here is.

Brian Roberts can afford to jack up the debt ratio on Comcast as high as he wants because at the end of the day, he can cut buybacks and plow money into bringing down debt for a 8-10 year period.

I think after Disney counterbids, we'll see at least one more Comcast bid.

After that it'll get interesting.


Internet service has much higher margin at least for the next 5-10 years (while there's minimal competition, I don't think 5G will be able to compete with full duplex Docsis 3.1 offering gigabit up/down). Video is where the margins are being crunched, but broadband makes up for it.

Comcast has regularly grown its broadband revenue at a 8-10% rate the past couple of years while video has grown 2-4% (due to cord cutting), and the cost of providing internet is much lower than video (where you have to pay providers for their networks).

That's why Comcast can afford to take on a lot of debt over the next 5-10 years and pay it down with the big payments from broadband.

Timeline wise: I think Fox board determines whether the bid is superior on Wednesday, then Disney has until Wednesday June 27 to counteroffer.

So most likely the bidding will heat up after Wednesday.

What's interesting is that Disney only really has to match the Comcast offer for their first counter, and I don't see Comcast going significantly higher than they are now considering they haven't budged from their initial offer. Disney stock is still massively undervalued right now, and I think Roberts and the Fox Board realizes this.

Let's face it though, at 8.3x adjusted EBITDA Disney was getting Fox for a steal. Comcast's offer is much more reasonable for these assets. A little bit more though and it starts getting pricy.

Sidenote: Rich Greenfield at BTIG is full of it. For a media analyst, he really doesn't get it.

 

[mikejs78]

I may be out of date, but LTE-A tops out at 1.5Gbps but no consumer sees anywhere near that. I think most carriers say "can hit 300Mbps" for LTE-A. If 5G can hit 10Gbps, a consumer might see 1Gbps, but I think that'll be a longshot until the networks really get built out.

Real-world field tests have estimated ~1.4 Gbps practical speeds for consumers. Even if it's a little less, around 1Gbps, that's enough to provide real competition for broadband, which will put price pressure on Comcast and eat into the current high profit margins. Great for consumers, but it represents a real business risk for Comcast.

 

[seascape]

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.