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FOX/Disney deal

http://www.latimes.com/business/hollywood/la-fi-ct-disney-stock-downgrade-20180618-story.html

Update on the Disney and Comcast's talks over Fox Assets.

A prominent analyst on Monday downgraded Walt Disney Co.’s stock to a “sell” rating, citing concerns that a potential bidding war with Comcast Corp. might cause the company to overpay for 21st Century Fox’s entertainment assets.

Comcast last week bid $65 billion in an all-cash offer for much of Rupert Murdoch’s Fox, which had already agreed to be sold to Disney in an all-stock deal. The Comcast offer represented a 19% premium to the Disney proposal.

Disney is widely expected to raise its offer for Fox properties, which include the Century City film and TV studios, cable TV channels FX and National Geographic, regional sports networks and Fox's international holdings.

The planned acquisition is seen as an important component of Disney’s plan to compete with digital insurgents such as Netflix by bolstering its own upcoming streaming service with more content. Still, if Disney has to boost its offer for Fox, that could reduce the company’s value for shareholders, said Pivotal Research analyst Brian Wieser in a research report.

“Certainly, we see industry consolidation as positive for the industry relative to its absence,” Wieser said in his report. “However, we also think that if Disney has to pay a higher price for the Fox Entertainment assets because it engages in a bidding war with Comcast, Disney’s value would be negatively impacted.”

On the other hand, if Disney loses Fox to Comcast, it would dampen the company’s efforts to forge a streaming future for itself, Wieser said. Disney and its investors, he noted, believe that the company’s focus on a direct-to-consumer strategy is the right move to adapt to shifting audience behavior.

“The absence of completion of the transaction would also be negative for Disney as it would mean the company would be unable to realize the synergies it expects to produce from the transaction,” Wieser said. “The strategic position of the company would further be weakened.”

Disney did not immediately respond to requests for comment.

Shares of the Burbank media company fell 2%, or $1.79, to $107.06 in Monday trading on Wall Street. Pivotal Research, which has a target price of $93 on the stock, is the lone brokerage with a “sell” rating for Disney among analysts who cover the company, according to FactSet.
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https://www.fiercecable.com/cable/comcast-would-rack-up-unprecedented-170b-debt-mergers-analysts-say

Another article on the Comcast and Disney's fight to get the Fox Assets.

Comcast will become one of the most indebted companies in the world, leveraging around $170 billion, if proposed purchases of Sky and 21st Century Fox come to fruition, according to ratings firm Moody’s.

In fact, not counting banks, Comcast would only be surpassed in debt obligation by AT&T, which just paid $85.4 billion for Time Warner Inc. after buying DirecTV for nearly $50 billion. AT&T is carrying close to $250 billion in debt obligations.

"It's an unprecedented amount of debt for a company like Comcast," Cowen analyst Gregory Williams told CNN.

As CNN also noted, Comcast has only around $6 billion on its balance sheet, so it will have to borrow most of the $65 billion needed to purchase Fox. Additionally, it would take on around $20 million in debt from Fox should that acquisition go through.

With the two mergers, Comcast’s debt to income ratio would rise from 2.5 times its annual profit to 4.25 times.

"The willingness to take your leverage up to this level is a bit of a surprise," Morgan Stanley analyst Ben Swinburne said during a Comcast conference call last week.

Speaking to investors last week to formally announce its attempt to buy out the bulk of Fox assets from under the nose of prospective suitor Disney, Comcast CEO Brian Roberts said paying down debt will become the cable conglomerate’s top priority following the mergers.

“We're having an excellent quarter, and we've had an excellent run for several years," Roberts said. "We're confident enough in the company and our prospects that we can take a temporary releveraging and bring us back down.”
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Why would companies like these choose to assume so much debt for the sake of expansion? How long will it be before they pay it down?
 
Ccook55 said:
Why would companies like these choose to assume so much debt for the sake of expansion? How long will it be before they pay it down?
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It's interesting because the market cap on Comcast is about $185 billion, and AT&T is $239 billion. So debt is about equal to market cap.
 
Comcast’s 2.25x debt-to-income ratio wouldn’t refi my car, let alone 4.25x.
 
Quite right. Forgot about the collateral companies like that carry.
 
Ccook55 said:
Comcast’s 2.25x debt-to-income ratio wouldn’t refi my car, let alone 4.25x.
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Households with $80,000 annual income routinely buy homes in the $240,000 to $320,000 range.

For a company, that is not an unusual amount of debt.
 
https://deadline.com/2018/06/disney-fox-merger-increased-bid-in-wake-of-comcast-offer-1202414080/


Update on the Disney vs Comcast fight over Fox Assets.

. The Walt Disney Company has boosted its bid for the studio and cable network assets of 21st Century Fox to $71.3 billion in cash and stock.


The offer is nearly $19 billion richer than the one Fox accepted last December, and it’s close to 10% ahead of the $65 billion one Comcast submitted last week. Most analysts and industry observers had expected Disney to match Comcast, but not go so much higher. The aggressive counter is a sign of the intensity of the M&A climate. AT&T finally closed its purchase of Time Warner late last week and other traditional media companies are urgently seeking dance partners as they battle deep-pocketed digital rivals.
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Interesting because a lot of the commentary was that the regional sports networks were important to Disney. Now, apparently not.
 
https://www.usatoday.com/story/mone...er-regulatory-risk-than-one-disney/734979002/

Update on the Disney/Fox talks.

. Twenty-First Century Fox says the sale of its movie and TV studios to Comcast faces more regulatory risk than one to original bidder Disney.The Fox board expects a deal with Disney, which increased its offer last week to about $71 billion, would be "likely to receive required regulatory approvals and ultimately be consummated," while a transaction with Comcast carried "higher regulatory risk" and could be delayed or denied, according to a Securities and Exchange Commission filing.Fox, which aims to refocus on live news and sports, is looking to sell its studios, channels FX and National Geographic, 22 regional sports networks, and its 30 percent share of streaming service Hulu and a 39 percent stake in U.K.-based pay-TV and broadband provider Sky.

Fox's A shares fell 1%, while Disney was close to flat and Comcast edged down 0.7%.Among the board's other concerns: Comcast's potential controlling interest in Hulu; currently, Comcast, Disney and Fox hold 30 percent stakes and AT&T's WarnerMedia holds 10 percent.

Fox's board suggested shareholders approve the Disney sale when both companies' shareholders vote on July 10, the filing says, noting that its improved offer represents a 36% premium to its original $52.4 billion offer for the Fox assets made in December . Disney's latest offer, a cash and stock deal, is also a 9 percent premium to Comcast's, the board said in the filing.

But the bidding war isn't likely over. Iger has said Fox's content is needed to enhance Disney's planned subscription video service, expected to begin streaming in 2019. But Comcast also sees Fox's assets including media company Star India and Sky as keys to international growth.

"There simply is no fallback plan for either company for these one-of-a-kind/last-of-their kind assets," said Rich Greenfield, a media and technology analyst with financial services firm BTIG in New York, in a note to investors Tuesday.
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Looking at it over the past ten days, Disney stock has been sinking because of the higher offer and the additional debt. DIS lost $4 this week.
 
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