In this segment from Motley Fool Money, host Chris Hill and analysts Jason Moser, David Kretzmann, and Ron Gross weigh in on the news — predicted on this very podcast — that Disney (NYSE: DIS) has raised its offer for Twenty-First Century Fox‘s (NASDAQ: FOX) (NASDAQ: FOXA) media assets. The new bid — $71 billion in cash and stock — is a major step up from its original offer of $52 billion, and from Comcast‘s (NASDAQ: CMCSA) counter of $65 billion. The Fools discuss whether Comcast is going to up the ante; which suitor is likely to win, and why; how long it will take the ultimate buyer to justify their now much-larger investment; and more.
A full transcript follows the video.
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This video was recorded on June 22, 2018.
Chris Hill: We begin with the ongoing clash of the titans. A week ago, it was Comcast raising the stakes in the bid for 21st Century Fox’s entertainment assets. This week, Disney returned fire, upping its bid to $71 billion in cash and stock. Jason, that’s a big jump over their original offer of $52 billion.
Jason Moser: It is a big jump. And everybody wants us to make a call, Chris. Who’s going to end up getting these Fox assets in the end? I’m going to go ahead and make the call. I’m telling you, it’s going to be Disney.
Ron Gross: Are you getting a lot of people asking you to make this call?
Moser: [laughs] It does seem like it! We have some requests here and there. And I imagine all of our listeners want us to take a stance, too, so I’m taking one, Ron.
Moser: Listen, I think this is something that is very much in Disney’s wheelhouse. They are viewing this as getting the intellectual property, the content, the characters, all of these stories. They have a very rich history of developing worlds like these and then monetizing them in very meaningful ways over long periods of time. So, I think Disney really wants this deal.
Comcast, I feel like, wants it, but I feel like maybe they feel like they need it more than anything else. I think there’s some desperation there that may not ultimately end up working out in their favor. Disney may overpay, it might seem, in the near run here. But there’s a lot of backstory here. When you read a little bit more about the relationships between the executives at Comcast and Fox, it really does feel like Fox would much rather be a part of the Disney family. And if you’re an investor that can look out five, ten years and see the benefits there that Disney could gain from this deal, I think it begins to make a little bit more sense.
David Kretzmann: $71 billion is a lot of money, so I take a step back and I just wonder, is there potentially a better way that Disney could allocate this cash, either developing new franchises —
Gross: A dividend.
Kretzmann: A dividend. That’s a good idea for Iger there.
Moser: He wants the Obi-Wan Kenobi spin-off. That’s what he’s gunning for there.
Kretzmann: See, as a user, and potentially as an investor, I feel like Disney should be throwing a little bit more of that cash at Lucasfilm. Apparently, they’re putting Star Wars spin-off movies on hold. The whole Lucasfilm segment is in disarray. They’ve had directors coming and going, a lot of disagreements, apparently, over the vision for Star Wars. You have to figure out Star Wars. Lucasfilm, they need to get that together.
Hill: Ron, to David’s point, right now, we’re talking about $71 billion. Comcast is absolutely going to come back with a higher offer, aren’t they?
Gross: Conventional wisdom is yes. Will it be high enough to make the difference, I don’t know. We’re getting into big, big numbers — not like $52 billion originally wasn’t big. But we’re getting into the $70-80 billion numbers, and there comes a time where it stops making sense.
Moser: I’m not convinced they will come back with another counter. When you read a little bit more into the backstory, with the friction, the tension between these two companies and these executives, I can’t help but wonder if Comcast doesn’t see the writing on the wall here and they just have to let this thing go and get focused on business as usual.
Hill: Here’s the thing. Yes, there are other ways to allocate this money, but if you’re looking to acquire large entertainment assets, there’s nothing else out there that’s like this. There’s no consolation prize for whichever company doesn’t end up with these assets.
Moser: True, and I agree with that totally. I think that’s why Disney ultimately ends up with this. Again, it’s right in their wheelhouse. You have to work a little bit more to connect the dots to really see the value with Comcast getting this deal. With Disney, it just seems like it’s a much clearer light at the end of the tunnel.
Kretzmann: I agree. I think Disney ultimately wins out here. But please, Obi-Wan Kenobi spin-off. Figure out Lucasfilm, now.
Chris Hill owns shares of Walt Disney. David Kretzmann owns shares of Walt Disney. Jason Moser owns shares of Walt Disney. Ron Gross owns shares of Walt Disney. The Motley Fool owns shares of and recommends Walt Disney. The Motley Fool has a disclosure policy.