I've been studying the numbers of what Disney would look like if they put out a $90 billion bid, assuming 50/50 cash/stock, and compared that to the impact of a $90 billion all-cash bid from Comcast.
Disney would increase their debt from their current bid of $74.79 billion to $84.14 billion. This would increase their leverage from 3.4x to 3.82x assuming 39% stake in Sky. (I didn't run the numbers including Sky simply because I think they'll give it up/sell it if they have to.)
This is something Disney would be comfortable with.
Disney would also have to issue about 96 million more shares at the midpoint of the existing collar for a total of 439 million new shares, this compares to initial and current bids of 515 million and 343 million shares, respectively. The midpoint is currently situated at roughly $104/share, about $2 dollars less than their current share price. This would mean that Fox shareholders would hold roughly 23% of the pro forma company. This is more than the current bid of 19%, but less than the initial bid where they would hold 25%. Disney should also be comfortable here.
Raising Comcast's bid to $90 billion all-cash would increase their debt from $170 billion to $195 billion, assuming there is no increase in their Sky bid, which there is likely to be, but I didn't include it for the sake of comparison. This would increase their leverage from 4.25x to 4.88x, in other words it would take them 5.36 years to pay down their debt to reasonable levels versus the 4.1 years of their current bid, assuming a decease of half a turn of leverage per year.
With this model, Disney would be able to return to attractive leverage 2 years before Comcast. I should also note that going this high for Comcast would almost certainly devastate their credit rating.
Have fun picking this apart!
