Rupert Murdoch's 21st Century Fox walked away from a potential blockbuster sale of its entertainment assets to Comcast because the cable group, which owns NBC Universal, did not offer to pay a break fee in the event that its proposed deal collapsed, according to a regulatory filing.
The S4 filing reveals how close Mr Murdoch came to pursuing a sale to Comcast that it ultimately struck with Walt Disney. The Disney deal gives the Fox assets – which include its cable networks, movie studio and international businesses such as its stake in Sky – an enterprise value of $66 billion (€53.3 billion).
Risk
The Fox filing reveals that “party B” – widely known to be Comcast – “was unwilling to agree to an acceptable allocation of regulatory risk” associated with the purchase of the Fox assets. The subject of a break fee was raised multiple times in discussions between the two sides, according to the filing.
NBC Universal has significant overlapping media interests that both Comcast and Fox acknowledged would have been an impediment to the deal. Barclays analysts recently suggested Comcast could have to sell NBC Universal to get a purchase of Fox cleared by US regulators, and in a research note pointed to the dim view taken of behavioural remedies mooted for AT&T's $85.4 billion purchase of Time Warner. The US government has sued to block that deal.
In the filing, Fox states that Comcast “was unwilling to offer a reverse termination fee despite repeated requests by 21CF and its representatives”.
The filing also suggests that Comcast’s deal proposal would have potentially created a tax liability for Fox that would have effectively lowered the value of the Comcast offer. In the filing, Fox says that Comcast’s response to any potential regulatory intervention would have effectively reduced the value of its offer.
Review
The filing states that Fox’s management “remained concerned” that Comcast’s proposal “created a potential to diminish the acquisition premium” due to Fox shareholders.
Mr Murdoch and Fox ultimately opted to sell the company's entertainment assets to Disney, after turning down Comcast and rejecting interest from Verizon, referred to in the document as "party A".
But Comcast has not given up on getting some of the Fox assets. The company recently made a proposal to acquire Sky, the pan-European pay TV company in which Fox has a 39 per cent stake.
Mr Murdoch and Fox are in the midst of a protracted regulatory review and will sell 100 per cent of Sky to Disney if the acquisition is approved by the UK government.
But Comcast has offered to buy Sky at £12.50 a share — a hefty premium to Fox’s £10.75 offer — although it has yet to make a formal offer.
Fox, Disney and Comcast all declined to comment.
– Copyright The Financial Times Limited 2018
