The Disney-Fox merger is about to become a reality.
Comcast said Thursday it was withdrawing from the race to buy key portions of 21st Century Fox, removing Disney’s last significant hurdle for the historic acquisition.
The Philadelphia-based cable giant said that it would instead focus its efforts on bidding for a majority stake in European pay-TV service Sky, which Fox also has been chasing.
“I’d like to congratulate Bob Iger and the team at Disney and commend the Murdoch family and Fox for creating such a desirable and respected company,” Comcast’s chairman and chief executive, Brian Roberts, said in a statement.
The news clears the way for Disney to pay $71.3 billion for the majority of 21st Century Fox assets, including film and television studios and cable channels around the world. Those assets are in great demand as legacy media companies seek to scale up to take on tech entities such as Netflix and Apple, which increasingly are becoming content power players.
Comcast had entered the race for Rupert Murdoch’s entertainment empire in June, bidding $65 billion for the assets after Disney had made an initial bid of $52.4 billion in December. The cable giant, which also owns NBC Universal, believed it wouldn’t face any regulatory issues after a judge had ruled against the Justice Department in its bid to stop the AT&T-Time Warner combination. But Disney fired back with a bid of its own shortly after.
Comcast had waited several weeks before dropping out as executives considered whether they wanted to place a fresh bid. Analysts believe that spending at least $75 billion for Fox, as the company would have had to do to top the Disney bid, would require taking on large amounts of debt and throw the firm’s balance sheet out of joint.
The Disney bid still needs to be approved by Fox shareholders later this month, but, barring a curveball, that is considered a formality given Rupert Murdoch’s support of the deal. The Justice Department has already said it will approve the merger on the condition that the combined companies sold off Fox’s 22 regional sports networks, which compete with Disney-owned ESPN.
Still, the news does not so much end the battle between Comcast and Disney as it does shift it. Comcast has made a play for a 61 percent stake in Sky that values that company at $34 billion, higher than Fox’s — and soon, Disney’s — recent bid and its $32.5 billion valuation. Disney, thanks to the Fox acquisition, will already own the remaining 39 percent of Sky.
Sky, which has more than 20 million subscribers in Europe, is considered a key prize, given both Disney’s ambition to reach consumers directly with its content and Comcast’s desire to have a greater global footprint.
Disney chief executive Robert Iger released a statement Thursday affirming the company’s satisfaction about the way the bidding war for 21st Century Fox played out. “Our incredible enthusiasm for this acquisition and the value it will create has continued to grow as we’ve come to know 21st Century Fox’s stellar array of talent and assets. We’re extremely pleased with today’s news, and our focus now is on completing the regulatory process and ultimately moving toward integrating our businesses,” he said.
Disney is set to become a content megalith, owning two landmark operations that focus on film and television, leaving Comcast to try to match it. Disney’s stock closed up 1.3 percent Thursday to $112.13. Comcast ended the day up 2.56 percent closing at $34.91.
In the bid to rule entertainment, AT&T is leading the pack from the telecommunications side with its recent regulatory victory to purchase Time Warner, which it has renamed Warner Media.
Apple and Amazon.com have launched ambitious content programs of their own and could acquire firms themselves. (Amazon’s chief executive, Jeffrey P. Bezos, owns The Washington Post.)
Netflix remains the undisputed king of streaming entertainment, even as it faces some challenges.
Entities such as Lionsgate, Sony Entertainment, Viacom and CBS remain potential acquisition targets by either a tech firm or a telco such as Verizon, as a heated M&A climate and loose regulatory environment continue to take hold.