The ongoing drama regarding who will acquire Twenty-First Century Fox (NASDAQ: FOXA) (NASDAQ: FOX) may have hit an inflection point on Wednesday. Primary suitor Walt Disney (NYSE: DIS) announced that the U.S. Department of Justice (DOJ) has cleared its proposed merger with Fox. The only condition would be the divestiture of Fox’s 22 regional sports networks in order for the deal to close.
The company has spent months seeking regulatory approval, something Disney CEO Bob Iger cited as an advantage last week: “We are already six months into the regulatory process and we are confident we have a clear and timely path to approval.” Previous comments made by the head of the DOJ’s Antitrust Division, Makan Delrahim, signaled that approval was likely. “They had good advice and carved out surgically a transaction that might be doable,” he said.
With one of the biggest hurdles now behind it, did Disney just clinch the deal?
The spectacle continues
The back-and-forth between Disney and Comcast (NASDAQ: CMCSA), Fox’s other potential acquirer, has played out in board rooms and in the press, with speculation running rampant about whether Comcast would up its bid yet again.
The speed of the approval from the Justice Department surprised some observers, as deals of this type can typically take a year or more to gain clearance. The approval process for Comcast would likely be more complex and involve a higher degree of scrutiny, particularly in light of the company’s history with the DOJ.
Late last year, seven years after the close of Comcast’s purchase of NBC Universal, a senator requested a review of certain conditions that were imposed on the deal and are scheduled to expire in September. Those provisions prohibited Comcast from withholding its content from online, cable, and satellite competitors. There have been a number of complaints lodged against Comcast by smaller competitors, and concerns have also been raised recently due to the reversal of net neutrality and the effect that might have on the competitive landscape.
Is another bid forthcoming?
There are indications that Comcast is working to line up additional financing — either in partnership with other companies or from private-equity investors — which it would need if it decides to make a counteroffer. The company is looking to raise as much as $90 billion to support any future bid.
Disney originally announced its intention to acquire Fox late last year, in a deal valued at $52 billion. Rumors had been swirling for months that numerous companies, including Disney, Comcast, and Verizon, had expressed an interest in acquiring assets from Fox. After Disney’s initial bid, it came to light that Comcast had made a higher, unofficial offer, which Fox promptly declined due to antitrust concerns.
In mid-June, Comcast made a new $65 billion all-cash offer for Fox, following the favorable court ruling that allowed AT&T to acquire Time Warner. The case had been closely watched in the media industry, in an effort to assess the regulatory landscape, and the outcome gave Comcast hope that it could achieve a similar approval.
Disney countered, upping its offer to $71.3 billion in cash and stock, which was immediately accepted by Fox.
It ain’t over ’til it’s over
Comcast is said to be exploring all its options, which could include a higher bid, or walking away from the deal altogether. Since there are additional regulatory approvals required from other countries and Fox shareholders have yet to vote on the Disney deal, Comcast isn’t in a rush to make a decision.
Still, having cleared one of the more significant regulatory hurdles and being Fox’s preferred suitor appears to give Disney the upper hand. It’s not over yet, but this latest development puts Disney much closer to the finish line.
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Danny Vena owns shares of Walt Disney and is long January 2019 $85 calls on Walt Disney. The Motley Fool owns shares of and recommends Walt Disney. The Motley Fool owns shares of Verizon Communications. The Motley Fool has a disclosure policy.