DOJ'S AT&T/TW Appeal Seen Unlikely to Have Big Played Role in Comcast Ending Its Fox Hunt

Though Fox had raised concerns about the regulatory heavy lifting that a deal for its nonbroadcast assets with Comcast might represent (see 1806260038), antitrust issues and the DOJ's AT&T/Time Warner appeal likely didn't play a notable role in Comcast taking itself out of the Fox running, some experts told us. But others see the AT&T/TW appeal raising notable regulatory concerns for the MVPD. Comcast didn't comment.

The relative antitrust risk of a Comcast bid versus a Disney one has to be paid for, and once DOJ approved Disney/Fox -- even with regional sports network divestitures (see 1806270032) -- that risk gap grew, said antitrust scholar John Lopatka, Penn State Noll distinguished law professor. That gap probably grew a bit more because of DOJ's decision to appeal the district court judge's order allowing AT&T/TW (see 1807120068), but it doesn't seem like that amount would be decisive, he said. He said the DOJ appeal injects a note of uncertainty, but antitrust issues were always a concern in Fox's assessment in the competing bids.

The appeal might have a slight chilling effect on other media deals, though likely not a long-term one, Lopatka said. What would have a long-term effect is if the appellate court reverses, he said.

Given the low likelihood of a department win, the appeal isn't likely to have been the tipping point on Comcast's decision, said antitrust scholar George Hay, Cornell Law School professor. He said the appeal will likely be narrowly theoretical, arguing that U.S. District Judge Richard Leon never quite understood DOJ's theory of harm. Hay said the appeal likely isn't chilling other deals, between the conservatism of DOJ antitrust chief Makan Delrahim, the vertical nature of AT&T/TW while many media deals being talked about are horizontal and that DOJ lost the AT&T case at the district-court level. Boies Schiller regulatory risk lawyer Travis LeBlanc emailed that Comcast's decision was likely made due to business/financial terms rather than antitrust concerns.

Others see an AT&T/TW ripple effect swamping Comcast/Fox. Raymond James analyst Frank Louthan emailed investors Thursday that DOJ's appeal of AT&T/TW, significantly delaying the outcome of that deal, put even more doubt on the certainty of Comcast/Fox closing. Raymond James said even Comcast's being able to bid more than the current $38 per share offer from Disney wasn't sufficient for Fox given the possible 18-month review period. A cable lawyer with transactions experience said Fox could have been asking for a particularly large breakup fee from Comcast because of the heavier lift that Comcast/Fox represented. Between the U.K. government having already cleared a path for Comcast's bid for Sky (see 1806050003), and the MVPD facing a fraught regulatory path for Fox -- especially with the warning sign that AT&T/TW represents -- might have made for an obvious easier route for Comcast to follow, the lawyer said.

Instead of the Fox assets, Comcast is focusing instead on its bid for Sky, it said Thursday. Fox also is seeking Sky (see 1807120001). Disney CEO Bob Iger said the company was "extremely pleased" with Comcast's dropping out and now focused on the regulatory process and integrating Fox.

Some see Comcast's comments about Sky as a signal to Disney. The cable lawyer said Comcast, now sitting on the cash it otherwise would have spent on Fox, seemed to be telling Disney -- which now is paying an inflated price -- not to expect the MVPD to give any quarter on its interest on Sky.

Wall Street is split on what Sky represents for Comcast. Sky is a poor fit for Comcast's vision, MoffettNathanson wrote to investors Thursday. None of Sky's exclusive deals -- such as with Premier League Football -- is guaranteed to last, and Comcast's challenge would then be to ramp up its studio slate fast enough to feed the Sky distribution platform but "will have to spend like drunken sailors to do it," it said. Raymond James said Comcast/Sky "would provide ample runway for long-term top-line growth and outsized capital returns."