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Comcast concedes to Disney in Fox hunt

By LIANA B. BAKER and CARL O'DONNELL
Reuters

July 19. 2018 7:48PM
The Comcast NBC logo is shown on a building in Los Angeles on June 13. (REUTERS/Mike Blake/File Photo)



Comcast Corp. dropped its $66 billion bid for Twenty-First Century Fox Inc's entertainment assets on Thursday but said it would still try to expand its international footprint by acquiring 61 percent of European broadcaster Sky Plc, the remainder of which is owned by Fox.

Comcast's withdrawal is a concession to Walt Disney Co., which last month sweetened its offer for the Fox assets to $71.3 billion, in a bid to unite two storied Hollywood studios and several television networks under one corporate umbrella.

Comcast's move de-escalates one of the media industry's most high-profile confrontations, which pitted Comcast Chief Executive Brian Roberts against Fox Executive Chairman Rupert Murdoch and Disney CEO Bob Iger. However, it still leaves the two companies competing to expand in Europe via a bidding war for Sky, which is 39-percent owned by Fox.

Fox has also made an offer for the 61 percent of Sky it does not own, although Comcast is currently the highest bidder with a 14.75 pounds-per share-offer, worth $34 billion, for the London-listed pay TV group.

Shares of Comcast, the largest U.S. cable company, rose 2.7 percent as investors were relieved the company did not try to outbid Disney further. Disney shares were up 1.6 percent.

Fox shares fell 1.2 percent and Sky ended down 1.5 percent. One of the reasons Comcast dropped its bid for the Fox assets was that the bidding war was inflating the value of Sky, given its partial ownership by Fox, according to sources familiar with the company's thinking.

"Walking away from the battle for Fox at this price we think supports the view that (Comcast is) fine without it," said Jonathan Chaplin, analyst at New Street Research. "It remains to be seen how Sky wraps up, but we think it is highly unlikely that they would bid up to a price that would suggest desperation."

In a regulatory filing last week, Fox and Disney acknowledged for the first time they may not try to again outbid Comcast on Sky, though the sources stressed no decision has been taken.

Bernstein analysts have said Disney's debt pile could now hamper its ability to take on Comcast with a new bid for Sky, partly because it will need to invest even more to launch a successful direct-to-consumer streaming platform.

On CNBC, Disney's Iger said he was "extremely pleased with today's news." Fox and Disney shareholders will vote on their deal next week.

Comcast dropped its bid for the Fox assets because it was concerned the price was becoming too high, even though its banks were ready to finance a new bid, according to the sources. It was also worried how much revenue it would lose in divesting assets to appease U.S. antitrust regulators.


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