With Comcast formally putting a bid in for the 21st Century Fox assets after the bell with its superior $65 billion all cash equity value offer, now all eyes are on Disney and Iger’s next move in this game of high stakes poker. It appears with Roberts and Comcast putting in a very robust $65 billion cash offer vs. Disney’s $52 billion all stock offer that this was meant as a strong signal (along with its breakup value sweetener) to show “clear commitment” to Fox and its Board about acquiring these golden assets from the arms of Disney. For Disney and Iger, the next step will be to raise its bid and match Comcast with an all cash $65 billion bid as financing appears ready to go as the Comcast bid was widely expected after Judge Leon gave the green light to the AT&T/Time Warner deal. Disney is in a quagmire as Iger and the company craves the unique 21st Century assets which will significantly bulk up and accelerate the company’s streaming ambitions for the coming years. That said, if a winning bid ultimately is in the $70 billion to $75 billion range it might be too high of a price tag for the company (and investors) to swallow depending on how the hotly contested bidding war progresses over the coming weeks between these two stalwarts. We note that Iger and Disney are heavily betting on these Fox assets as evidenced by its original $52 billion all stock bid, which will now have to be transformed into a higher, all cash bid with Comcast’s bid today.
Disney vs. Comcast; the Battle Royale begins. This deal if successful in its battle vs. Comcast would put Disney in the catbirds seat in terms of content king and with its streaming service set to launch in 2019 Iger has a clear runway to gain market and mind share from the likes of Netflix. With Comcast already going after Sky assets in Europe, this is a logical and “aggressive move” for Comcast to go after these golden entertainment assets of Fox and would move Comcast to the forefront of the streaming game over the coming years in our opinion with Hulu as a crown jewel as part of this transaction which could be a bargaining chip. There are clearly vast synergies around the box office/advertising by combining Fox’s movie and television studio businesses (Pixar, Marvel, 20th Century Fox, etc.) with Disney’s vast entertainment assets that would give the combined media behemoth 35%-40% of domestic box office market share, while we also estimate there are roughly $2 billion of cost synergies that could be realized in the first 12 to 18 months of the deal as Disney finds overlap on the studio front. Comcast’s bid would not have as much pure synergy in our opinion, however this would be a major and defining strategic win for the company and Roberts if they head in this direction. It appears Roberts is laser focused on acquiring these assets to add to Comcast’s competitive moat of content and distribution. We will be watching this news closely over the coming days/weeks as Disney’s acquisition of Fox represents the epicenter of Disney’s streaming endeavors and Comcast entering the Fox sweepstakes is a game of high stakes poker that could change the course of the media and streaming landscape for decades to come depending on which direction this deal heads. In a nutshell, if Comcast won these assets from the arms of Disney it would be a “devastating and hard to recover blow” to Iger and Disney’s streaming ambitions going forward. We maintain our Highly Attractive rating and $120 price target on Disney.