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Comcast Officially Outbids Disney For Key Fox Assets, Here's Why It Matters

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Exactly three weeks after Comcast (CMCSA - Free Report) made its most recent plans to acquire a valuable array of 21st Century Fox (FOXA - Free Report) assets known, the cable and internet giant announced its official offer Wednesday afternoon. Comcast outbid Disney (DIS - Free Report) as the fight to remain dominant in the new age of entertainment heats up. Now let’s quickly examine Comcast’s offer and explain why it’s so important. 

Comcast offered to buy a massive chunk of Fox’s entertainment and international assets for $65 billion, which the company said marked a 19% premium compared to Disney’s all-stock offer worth $52.4 billion. Comcast’s latest offer comes after Fox turned down its previous offer, citing regulatory concerns.  

But today looks like a whole new world after a federal judge approved the AT&T (T - Free Report) and Time Warner merger on Tuesday. A move that sets up what could turn into not only a bidding war between Disney and Comcast for Fox but also lays the foundation for a string of other mergers.

“We are also highly confident that our proposed transaction will obtain all necessary regulatory approvals in a timely manner and that our transaction is as or more likely to receive regulatory approval than the Disney transaction,” Comcast wrote in a letter to Fox. “Accordingly, we are offering the same regulatory commitments as the ones 21CF has already obtained from Disney, including the same $2.5 billion reverse termination fee agreed to by Disney.”

Comcast also noted that “time is of the essence” because Fox scheduled its vote on the Disney merger proposal for July 10.

The Assets

The Fox assets that both Disney and Comcast hope to acquire include almost everything but Fox News, Fox Business Network, Fox Broadcasting Company, and a few others. Rupert Murdoch is selling Fox's movie and TV production assets, cable networks such as FX Networks, and popular entertainment properties including X-Men and Avatar.

Furthermore, the potential deal is set to include two major satellite distributors, Sky in Europe and Star in India, as well as Fox’s stake in Hulu—which would give Disney a controlling stake in the streaming power that competes directly against Netflix (NFLX - Free Report) , Amazon (AMZN - Free Report) , and YouTube TV (GOOGL - Free Report) .

Why It Matters

Comcast, which owns NBCUniversal, hopes to bolster its content offerings as the media landscape shifts rapidly. The deal would also theoretically make Comcast’s hugely popular cable and internet bundles look more enticing. The company’s move looks even more vital now that the AT&T-Time Warner merger was approved.  

Disney’s plan is similar: expand its content portfolio. The company bought ABC back in 1996 for nearly $20 billion. Since then, the entertainment powerhouse has gone after much smaller assets that have played an extremely valuable role, including Pixar, Marvel Entertainment, and most recently Lucasfilm—amounting to a total of $16 billion.

These acquisitions have turned Disney into a studio entertainment juggernaut, they will also play a key role in Disney’s new standalone streaming service that is set to launch in late 2019—as Disney waits for some of its current Netflix contracts to expire. The company’s streaming services becomes much more attractive with Fox’s movie and TV studios attached.

Stock Movement

Shares of Fox closed up 7.70% at $43.66 per share on Wednesday, after hitting a new all-time high during intraday trading. Disney stock gained 1.90%, while Comcast slipped marginally.

Investors will also see that shares of Disney and Comcast have sunk over the last year, with Comcast down big. Meanwhile, Fox has seen its stock price soar, spurred in part by Disney’s December 2017 offer.

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