Comcast makes formal $65B bid for Fox, confidently includes massive breakup fee

Comcast
NBCUniversal CEO Steve Burke said that Fox currently gets 70% of its revenue from overseas. An acquisition of Fox would increase Comcast’s international share from 9% to 27%. (Comcast)

Comcast made good on its threat to usurp Disney’s bid for select 21st Century Fox assets, offering the Fox board a $65 billion all-cash deal that would include a massive $4.025 billion breakup fee should things go south on the regulatory end. 

In a letter sent today from Comcast CEO Brian Roberts addressing Fox’s controlling family members, executive chairmen Rupert and Lachlan Murdoch, and CEO James Murdoch, the cable giant expressed its “disappointment” that Fox chose Disney's bid over Comcast's all-stock offer in December.

“We have reviewed the publicly available terms of the proposed Disney transaction, as well as the joint proxy statement/prospectus filed with the SEC describing the reasons for the Fox board of directors’ decision,” Roberts wrote. “In light of yesterday’s decision in the AT&T/Time Warner case, the limited time prior to your shareholders’ meeting, and our strong continued interest, we are pleased to present a new, all-cash proposal that fully addresses the board’s stated concerns with our prior proposal.”

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Roberts described the bid as inevitable following a federal court’s decision yesterday to allow AT&T to purchase Time Warner Inc. for $85.4 billion. The Comcast offer is 20% higher in value than Disney’s $55 billion offer. 

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Roberts said Comcast’s board of directors had unanimously approved the offer, meaning the deal doesn’t have to be run by shareholders, where dissonance toward the company’s M&A activities is running high. 

“Because of your decision to schedule the vote on the Disney merger proposal for July 10, time is of the essence for your consideration of our proposal,” Roberts added. 

The cable conglomerate also said that it had already tendered its Hart-Scott-Rodino antitrust filing with the Justice Department, and it expects the DOJ’s antitrust review process to flow congruently with that which has been scheduled for Disney. Comcast said it expects to close the deal 12 months after Fox signs on to it. 

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About $2.5 billion of the promised breakup fee comes from a commitment to pay Disney’s breakup fee in what Comcast terms as the “unlikely event” that the DOJ doesn’t sign off on the deal. The $4 billion-plus breakup commitment certainly expresses regulatory confidence from a cable company that was stopped cold by the FCC and DOJ three years ago from buying Time Warner Cable. 

“We think our deal is as or more likely to achieve approval as the Disney transaction,” Comcast CFO Mike Cavanagh said in an investor conference call this afternoon. He added, “While we weren’t looking for this deal, it presents a rare strategic moment.”

Both Burke and Roberts said it would be a high priority to get Comcast's sizable debt load down after the Fox deal closes.  

Comcast is trying to outbid Disney for assets including cable networks FX, FXX and National Geographic, 21 regional sports networks, Fox’s 30% stake in Hulu and movie and TV production studios. Also up for sale is Fox’s 39% share in U.K. satellite TV company Sky. Comcast is locked in a bidding war with Fox to buy the other 61% of Sky. Comcast said it is still committed to buying Sky; it will be a 100% owner of the company if the Fox deal comes through. 

Speaking alongside Roberts and Cavanagh today, Steve Burke, CEO of Comcast’s NBCUniversal unit, said Fox will only improve a Comcast media portfolio already thriving with NBCUniversal assets acquired in 2011. Burke specifically noted Fox’s ability to tap into foreign markets like Europe, India and Latin America with local language content—an international acumen, crucial in an era of increasing Netflix global domination, Comcast is currently somewhat bereft of. 

Burke noted that Fox currently gets 70% of its revenue from overseas. An acquisition of Fox would increase Comcast’s international share from 9% to 27%.

“We firmly believe that NBCUniversal would be the ideal home for the Fox assets,” Burke said.