Bob Iger is ready for a fight.
The Walt Disney Co. chairman and CEO, minutes after launching a sweetened $71.3 billion cash and stock offer for 21 Century Fox assets it already thought it had agreed to buy, told analysts that there is no way the entertainment giant would split those properties with Comcast, which made a competing bid last week.
Disney agreed in December to buy the Fox properties – cable channels FX, FXX and National Geographic, TV and film production studio 20 Century Fox, regional sports properties and interests in U.K. satellite TV company Sky and online video pioneer Hulu – for about $55 billion not including assumed debt. Comcast, which had been an early participant in the Fox auction, made a competing all-cash offer worth about $65 billion last week. The new Disney bid, which includes both cash and stock, represents a 10% premium to the Comcast offer.
Some analysts have wondered whether Disney and Comcast could work out a way to amicably split the Fox assets, but Iger quashed that idea in a conference call Wednesday.
“No,” Iger replied when asked if there was a way Comcast and Disney could split Fox. “We have an agreement in place with 21 Century Fox that precludes that from occurring.”
Iger also refuted Comcast’s claims that its deal with Fox had a better chance of passing regulatory muster than a Disney deal. Comcast had claimed that a Disney-Fox combination would control a 50% share of the movie box office in the country.
Iger said on the conference call that Disney already is six months into the regulatory approval process with Fox – stemming from its December agreement – which he called a “meaningful head start.” And he pointed to U.S. District Court Judge Richard Leon’s approval of AT&T’s purchase of Time Warner Inc., which many believe was one of the catalysts for the Comcast-Fox offer, as proof that Comcast’s road to regulatory acceptance could be rocky.
Iger said that in his decision, Judge Leon wrote that “‘a vertical merger can generate competitive harm,’ and ‘ the temptation by some to view this decision as being more than a resolution of this specific case should be resisted by one and all.’ One and all, as we read it, surely includes Comcast.”
Iger added that aside from being the largest cable operator in the country with 22 million video subscribers, Comcast also controls more than 40% of the broadband homes in the United States and has content assets including broadcast and cable networks.
“We have a much better opportunity than Comcast does in this case,” Iger said.
But it is unlikely that Comcast will take its ball and go home, now that Disney has upped its offer. While Comcast has declined comment, it is expected to make another, higher bid. The question remains how long either can withstand a prolonged process of one-upmanship.
Both Disney and Comcast have the capacity to increase their bids even more. On the conference call, Disney senior EVP and chief financial officer Christine McCarthy said that while the company considers its balance sheet a strategic as well as financial asset, it has always said it would be willing to take on more leverage if the opportunity was compelling enough.
“This is one of those opportunities,” she said of the Fox deal.