Not to mention the cost of Sky is going up without a doubt. Apparently we shouldn't see a response from Comcast for a while according to sources as they have to figure out what they're going to do. I think Disney's bid really caught them by surprise.
Disney caught almost everyone by surprise. All the analysts thought Disney would wait until the Fox Board said Comcasts offer was better and give Disney 5 days to respond. As far as I can see no one except me thought Disney may respond at the Board meeting. I did not think they would make a new deal before the meeting. Anyway, if Comcast does make a new offer they have to do it soon because once the feds approve the Disney deal Comcast has to bet Disney by quite a margin. Also if Comcast does make another offer count on Disney going all out for both Fox and Sky. There will be total war if Comcast continues. Comcast may be able to win Sky if they back off on Fox.
Those assets are worth far less when sold separately. They wouldn't recoup anything close to what they paid for them. Plus you have legal issues, it's absolutely not worth the headache.
I don't understand much about the UK tv market, but from what little I know, the value proposition for Sky is significantly undercut by Freeview. They've had strong financial results though, so they must have something compelling enough. Sports rights maybe?
Just wondering how you'd feel about Disney going to $45. Personally, if that DOJ leak turns out to be a dud, I could see the bidding capping out there. That would peg the cost at $84.15 billion. If the DOJ leak is on-point, which I suspect it is and some Disney source leaked it out, then I highly doubt Comcast will up their bid. I think they may be waiting around here for a bit to see if that report comes to fruition.
CFRA Capital has a 12 month projected price on Disney stock of $130.00. If one were to use that as a price to determine the Disney bid at the slue of Disney's offer is $21.606 in stock and $19.00 cash for a total of $40.606. The cash equivalent portion using a 20% tax rate would be over $5.00 more, (27*0.8=21.6).Just wondering how you'd feel about Disney going to $45. Personally, if that DOJ leak turns out to be a dud, I could see the bidding capping out there. That would peg the cost at $84.15 billion. If the DOJ leak is on-point, which I suspect it is and some Disney source leaked it out, then I highly doubt Comcast will up their bid. I think they may be waiting around here for a bit to see if that report comes to fruition.
It's kinda hard not to get lost in all these analysts opinions. Some of them are quite reasonable, and others somehow think this is going to go on forever, talking about $50+/share bids. Like slow down there!
Sidenote: I keep seeing people online pegging the rumored $41/share counter by Comcast at $79-80 billion, in reality it's about $76.7 billion. Not sure if I'm being too picky there, but it bothers me
If Comcast bids $90 billion cash, then the whole board should be ousted.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!