Characterized by one analyst as a "knockout punch," The Walt Disney Co.'s staggering $71 billion counter-offer on Wednesday pleased 21st Century Fox's board of directors and seemingly staggered rival Comcast Corp., but that's not the end of the story for a potential merger with global business ramifications.
Fox amended its original December 2017 merger agreement with Disney to reflect this new offer, and decreed it "superior" to Comcast's unsolicited $65 billion all-cash bid. However, that doesn't necessarily push the telecommunications conglomerate out of the running for assets that include FX Networks, National Geographic, a 30-percent stake in Hulu, a 31.9-percent interest in U.K. pay-TV and broadband provider Sky, and the 20th Century Fox film and television production studios, which are accompanied by the rights for the X-Men, Fantastic Four, Deadpool and Avatar, among other properties.
So, where does the tug of war over Fox go from here?
Fox's Stockholder Meeting
Disney's new offer, a combination of cash and stock, is a $19 billion increase from its opening salvo, and trumps Comcast's bid by $6 billion. It signals the entertainment giant's intense interest in the Fox assets, of course, but also CEO Bob Iger's eagerness to bring to an end this back and forth. After all, Disney and Fox have been working on this merger, officially, for six months. “Disney is going for the knockout punch, and they just may have delivered it,” investment banker Lloyd Greif told the Los Angeles Times about the counter-offer.
But Fox still has to convene a special meeting of shareholders to consider the merger agreement, which is now even more appealing, as stockholders can elect to receive cash as well as Disney shares. The Murdoch family, which sits atop the Fox throne, would end up with a sizeable stake in Disney, with Fox shareholders owning about 19 percent of the media giant. A meeting previously scheduled for July 10 to consider Disney's original proposal has been postponed so shareholders may better consider the current offer. In the meantime, however, Fox said in a statement that the company's directors aren't prohibited from evaluating "a competing proposal."
A Potential Response From Comcast
Comcast, which already owns NBC and Universal Pictures, among other assets, is expected to return to the table with another bid, and is reportedly looking for ways to line up additional financing without harming its credit rating. However, Moody's has warned a downgrade is still possible. Disney runs a similar risk.
Even if the telecommunications giant were to emerge from the bidding war successful, with Fox shareholders agreeing to the merger, it will have amassed estimated debts of $170 billion.