Despite AT&T/TW Verdict, Disney Has Easier Route to Fox Deal, CEO Iger Says as He Ups Bid
The AT&T/Time Warner verdict doesn't alter that Disney has an easier and quicker path to regulatory approval for buying Fox's nonbroadcast assets than Comcast does, Disney CEO Bob Iger said on an analyst call Wednesday after the company said it sweetened its offer for Fox's assets. Iger said Disney worked with regulatory authorities around the globe for the past six months "and made a lot of progress" toward approvals.
Iger said the U.S. District Court's AT&T/TW opinion this month (see 1806120060) was clear that vertical combinations -- like Comcast's rival Fox bid -- can generate competitive harm. He said the vertical integration concerns that were central to DOJ's AT&T/TW litigation were different from the concerns a Comcast bid presents. He said Comcast's market dominance in cable TV and broadband and its content ownership makes it "an apples to oranges comparison" of what Justice considered in the AT&T litigation. Since vertical concentration is a concern of DOJ, with the Comcast/NBCUniversal consent being evidence, Disney has "a much better opportunity in terms of approval and the timing of that approval" than Comcast, Iger said.
Disney's amended acquisition agreement with Fox is for $38 a share in cash and stock, up from $28 previously and eclipsing the $35 counteroffer from Comcast. Iger said New Disney will be "a truly global entertainment company," particularly with bigger presence in Europe, India and Latin America. Asked about the idea of Disney and Comcast dividing the Fox assets, Iger said Disney's deal with Fox precludes that.
Comcast says it has similar or lesser regulatory issues than Disney, given the concentration New Disney would have in the motion picture market and in live sports content with ESPN tied to Fox's regional sports networks. It says the broadband issue is misleading because AT&T has national wireless broadband capability but was allowed to buy TW and a Comcast/Fox deal doesn't affect the dynamics of the U.S. broadband market. Comcast didn't comment on the new Disney bid.
Fox's board, in consultation with outside counsel and financial advisers, hadn't concluded that the unsolicited Comcast bid (see 1806130036) could be considered superior, but the amended Disney agreement still allows Fox's board to evaluate competing proposals, the target said. New Street Research analyst Jonathan Chaplin emailed investors that even if Comcast were to go as high as $45 a share, it still might lose since Disney can match. MoffettNathanson said the sweeter Disney offer shows how serious Disney is about the Fox assets. It said a follow-up bid from Comcast is likely. The analysts agree with Iger that a Comcast/Fox bid contains regulatory hurdles that will lead to a longer regulatory review.
The AT&T/TW verdict should lead to more critical thinking about the application of antitrust law to modern markets, and antitrust authorities shouldn't rely on outdated market definitions, blogged Free State Foundation President Randolph May and Senior Fellow Theodore Bolema. They said the decision and its recognition of massive changes in the video programming and broadband distribution markets in recent years have big implications for other deals like Comcast's proposed buy of Fox and T-Mobile/Sprint. They said DOJ's theory of harm in AT&T/TW was reminiscent of vertical merger challenges brought decades ago, before court generally accepted the idea vertical mergers produce consumer and competition benefits because of the integration efficiencies. And DOJ's theory of harm also relied on a too-narrow view of evaluating the relevant video distribution market, ignoring over-the-top operations, May and Bolema wrote.