Comcast drops out of bidding war for Fox, paving way for Disney deal

Mike Snider | USA TODAY

Show Caption Hide Caption Comcast enters race for Sky with $31 bln offer U.S. cable giant Comcast offered to buy Sky for $31 billion in an unsolicited approach, taking on Rupert Murdoch's Fox and Bob Iger's Walt Disney in the battle for Europe's biggest pay-TV group.

Comcast is abandoning its contest with the Walt Disney Co. to acquire a collection of 21st Century Fox assets including the Fox movie and TV studios and stake in streaming service Hulu.

Over the last two months, Comcast has countered Disney in a bidding war for Fox's assets, which both companies consider crucial to a growing battle for entertainment, news and sports content delivered over the internet, as well as traditional pay-TV systems on cable, satellite and fiber.

Fox Executive Chairman Rupert Murdoch, who – along with sons Lachlan and James, control Fox – has said the family plans to refocus a smaller Fox on news and sports programming.

Comcast's exit paves an open path to Disney's acquisition of the Fox assets, which include its FX and National Geographic channels, 22 regional sports networks, as well as its 30 percent share of streaming service Hulu and 39 percent stake in U.K.-based pay-TV and broadband provider Sky.

Disney and Fox shareholders are scheduled to vote July 27 on the deal, and Fox's board has suggested shareholders approve the Disney sale.

More: What could a Comcast-Disney duel for Fox mean for you … and the Marvel Universe?

That recommendation hadn't slowed the Philadelphia-based internet and cable heavyweight. Comcast last month trumped Disney's original $52.4 billion offer for the Fox assets made in December with its own all-cash offer of $65 billion, about a 20 percent premium to Disney's original bid.

Then, Disney on June 20 countered with a $70.4 billion bid of cash and stock. Still, many Wall Street analysts expected Comcast to respond.

But Comcast CEO Brian Roberts decided to withdraw, he said Thursday. “I’d like to congratulate (Disney CEO) Bob Iger and the team at Disney and commend the Murdoch family and Fox for creating such a desirable and respected company," he said in a statement.

Comcast (CMCSA) shares rose 3.5 percent, Disney (DIS) shares gained 1.1 percent and 21st Century Fox (FOXA) shares lost 1.5 percent.

Instead, Comcast will focus on acquiring U.K.-based pay-TV and broadband provider Sky, Roberts says. Prior to putting its selected assets up for sale, Fox had been seeking to buy the 61 percent of Sky it does not already own.

But its $15 billion acquisition offer has been stalled by regulatory issues. Among U.K. regulators' concerns: sexual harassment and discrimination in the workplace at Fox News. The Murdochs ousted senior executives and top on-air talent at Fox News to send a signal to regulators that it had taken the issue seriously, but approval was far from certain.

In February, Comcast said it planned to submit a nearly $31 billion bid for the service, with Roberts saying Sky would serve as an international growth platform for the company. When it made the bid official in April, Comcast vowed to "establish an editorial Sky News board with the responsibility to ensure the editorial independence of Sky News for 10 years."

The company also pledged to maintain, for the next decade, at least the current spending level on Sky News, as well as keep Sky's U.K. headquarters for five years. Comcast also vowed not to buy any U.K. newspapers for five years.

What happens next depends on how bad Disney and Comcast want Sky. Fox increased its bid last week to $32.5 billion for the TV and broadband provider, effectively serving as a proxy for Disney in topping Comcast’s $31 billion bid.



But Comcast’s move to drop an attempt to acquire Fox’s assets, suggests it will make another higher offer, says Craig Moffett, partner and senior analyst at research firm MoffettNathanson. “As Comcast has made clear, that’s the asset they’ve really wanted all along, so it seems much less likely that Comcast will withdraw without at least a few more rounds of bidding,” he said in a note to investors Thursday.



Fox and Disney could let Comcast win the 61 percent of Sky currently up for bid and once the deal is done, hold onto it, sell its share to another bidder or sell it to Comcast, perhaps in a deal that would also send Comcast's 30 percent of Hulu to Disney.

The market seems to expect Comcast to win out, Moffett says. But even if it does, owning the majority of Sky would bring its own challenges, he says, as Sky’s rights for soccer, racing and other sports and entertainment will need to be renegotiated in the near future.



Comcast made its bid for Fox a day after a federal judge approved AT&T's $85 billion acquisition of Time Warner, as many experts saw that as sign of a lightening in regulatory scrutiny of media company mergers and acquisitions.

Subsequently, the Fox board said a deal with Comcast would carry "higher regulatory risk" than one with Disney. Last week, the Justice Department said it would appeal the AT&T-Time Warner decision.

As for Disney, its deal for the Fox assets was approved in the U.S. by the Justice Department, provided it sells Fox's 22 regional sports networks.

The new Disney will not only have Disney, Pixar, Marvel and Lucasfilm studios, but also the Fox movie and TV studios with franchises such as "The Simpsons," "Avatar" and "Alien."

Additionally, the acquisition of the "X-Men," "Deadpool" and "Fantastic Four" franchises, all created by Marvel Comics, offers a vast potential for Disney to unleash new Marvel films even more character-stuffed than the recent "Avengers: Infinity War" film.



“Our incredible enthusiasm for this acquisition and the value it will create has continued to grow as we’ve come to know 21st Century Fox’s stellar array of talent and assets," Iger said in a statement. "We’re extremely pleased with today’s news, and our focus now is on completing the regulatory process and ultimately moving toward integrating our businesses.”

Follow USA TODAY reporter Mike Snider on Twitter: @MikeSnider.

