As of now, Disney (NYSE: DIS) has the leading spot in the bidding war for the best parts of the Fox (NASDAQ: FOX) (NASDAQ: FOXA) media empire with its offer of almost $72 billion. But it was nearly inevitable that Comcast (NASDAQ: CMCSA) would come back with another raise.
In this segment of this MarketFoolery podcast, host Chris Hill and Motley Fool senior analyst Andy Cross consider the recent Wall Street Journal report that, before it makes that next bid, it’s gathering ammo in the form of financing to the tune of $90 billion. Whether that means Comcast will actually offer that much in its next attempt is anyone’s guess.
A full transcript follows the video.
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This video was recorded on June 27, 2018.
Chris Hill: I was looking through my notes and noticed that the last two Wednesday episodes of MarketFoolery started with us talking about the whole Disney, Fox, Comcast thing. I kind of feel compelled to start there again, because there is more news, and I wanted to get your take on this.
It’s the report in the Wall Street Journal that Comcast — and, this shouldn’t be a surprise to anyone who’s watching this — is looking to sure up cash because they want to make a bid to top Disney’s $71 billion bid. That’s not surprising. The number that got floated in this article is, they may be looking for as much as … $90 billion?!
Andy Cross: Yep. It’s big money, man.
Hill: That high?! You think it’s going to go that high?!
Cross: Boy, it would make Comcast one of the most levered companies in the United States. Not that they don’t have the cash flow to be able to pay for the debt, but Moody’s has already come out and said that that would put a significant ding into the Comcast balance sheet.
Whether they can line that up or not, it really goes to show you — and we’ve talked about this really since the end of last year during this entire saga — the value that these two companies are placing on the assets of Rupert Murdoch and 20th Century Fox, and what that may mean to both of these companies, especially Disney, who’s really hungry to get these assets. This is not a surprise to me. In fact, knowing the kind of deal-maker Rupert Murdoch is, he’s going to take the highest bid he can get, or at least try to push as far he can go.
It seems like right now, Disney has the slight upper hand, in my mind. Whether Comcast can pull this off … their $65 billion offer was an all-cash offer. There are some nice benefits to that, for him, his family, and shareholders — of which, Disney is a major shareholder of 20th Century Fox already. Still, as you and I were talking about earlier, Disney really wants these assets. It’ll be interesting to see if Comcast can pull this off.
Another big winner from this deal and all of these negotiations, Chris, is, there was an article in the Financial Times today about Goldman Sachs bringing in more than $100 million from helping negotiate this deal. I mean, the bankers are just licking their chops at these numbers getting tossed around. A $90 billion deal!
Hill: I’m glad that something finally went right for Goldman Sachs.
Cross: [laughs] They deserve it, right? They deserve it! Come on, nothing could go wrong for those guys!
Hill: They’re the true heroes in all of this.
Cross: I agree.
Hill: If we’re looking to get a handle on the timeline here, there was a joint meeting that was scheduled for July 10th, joint between Disney and Fox. That has been postponed indefinitely. If you’re Comcast, you’re happy about that, because that essentially buys you more time to sure up these assets.
I am curious to know what Brian Roberts and his team at Comcast are thinking, if they are thinking, “Let’s get the biggest offer we can right now and try and end this and force Disney to go higher than $90 billion,” or if they think, “No, let’s leave ourselves room for one more deal.” Right now, if the bidding starts at $71.5 billion —
Cross: Toss out a number, sure.
Hill: Exactly. They may be thinking, “OK, let’s come in at $80 billion, knowing that if we need to push it up to $90 billion, we can.”
Cross: I mean, Disney started this at the end of last year around $52 billion. It went to $65 billion with Comcast, now they pushed it up to north of $71 billion. And the number, as you mentioned, that at least has been kind of mentioned out there, could be as high as $90 billion, which is north of $50 a share for those assets. Whether Comcast can actually arrange that, and whether it’s private equity, other financing … like I said, it does make them extremely levered, and even partners might be a little leery around that.
Also interesting, both Bob Iger and Roberts from Comcast certainly have been piecing together their empires over the years. This is not a new thing. This would be a huge chunk for both of those companies, but still, they are empire builders. Brian Roberts is a huge shareholder in Comcast, having his family start it. So, trying to really solidify this empire for them, I think, is important for both of these people.
Putting together partnerships, and whether that could work or not — I mean, Disney has not necessarily said that they would be open for that. Brian Roberts might be more interested in maybe partnering with someone to do something like that. That could be a potential. But you’re talking going from $71 billion up to north of $90 billion, or $80 billion. He is itching to get something on the table to compete with Disney. He does not want to lose the access to these assets, or at least the opportunity to bid higher for these assets, and put another offer in front of Rupert Murdoch, who’s never shy of money.
Andy Cross owns shares of Comcast. Chris Hill owns shares of Walt Disney. The Motley Fool owns shares of and recommends Walt Disney. The Motley Fool owns shares of Moody’s. The Motley Fool has a disclosure policy.