cc Wednesday, June 20, 2018 latimes.com/news

Disney’s Bob Iger aims for a ‘knockout punch’ to Comcast with $71.3-billion bid for Fox

By MEG JAMES AND STEPHEN BATTAGLIO TIMES STAFF WRITERS

Walt Disney Co. Chief Executive Bob Iger has spent more than a dec- ade orchestrating blockbuster moves — building a $5.5-billion theme park and resort in China and buying such trophies as Pixar Animation and Mar- vel studios — to shape Disney into the world’s preeminent entertainment company. On Wednesday, Iger revealed just how much he wants the biggest prize yet — much of 21st Century Fox. Disney surprised Wall Street by in- creasing its earlier bid for the Fox assets by 36%, offering $71.3 billion to Rupert Murdoch and other Fox shareholders in a proposal that was designed to be a devastating blow to rival Comcast Corp. “This deal is supposed to be [Iger’s] swan song,” Tuna N. Amobi, Disney raised its bid for 21st Century Fox assets. a media analyst with CFRA Re- search, said in an interview. “It's in- So Iger didn’t take kindly to Com- “Disney is going for the knockout credibly important for him. This goes cast’s $65-billion offer last week for punch, and they just may have deliv- to the core of how he wants to leave the same Fox assets. He reportedly ered it,” Greif said. “It also makes it his mark on the company.” met with Murdoch in London on crystal clear who Rupert wants as his Iger had planned to retire next Tuesday, less than 24 hours before the go-forward partner. Bob didn’t come year after 14 years in the top job, but Murdochs and other Fox board mem- up with this counter-offer in a vacu- he pushed his retirement date to the bers were scheduled to meet to mull um. He had help.” end of 2021 so that he still would be over the Comcast proposal. Iger The stakes are high. Traditional at the helm as his company absorbs raised Disney’s bid by $19 billion. media companies, such as Disney, the Fox assets. Those include Fox’s The offer also was $6 billion more Fox and Comcast, have recognized prolific television and movie studios, than Comcast’s bid. that the playing field is starting to tilt cable channels FX and National Geo- Lloyd Greif, a Los Angeles invest- in favor of tech giants, including Net- graphic, and a growing international ment banker, said the new agreement flix, Facebook and Apple, which have presence in Europe, India and Latin indicates Murdoch favors a deal with deep pockets, global businesses and America. Disney rather than Comcast. direct relationships with consumers. That’s why Murdoch last year con- shares. Fox shareholders would re- The higher Disney offer prompted cluded that Fox, one of the biggest ceive $38 a share. credit ratings agency Moody’s to say media companies around, may not be Investors could decide whether that it may downgrade the company's large enough to compete in the future. they want to take a bigger percentage debt. The agency said Wednesday it Those same concerns drove AT&T of stock, an option that would be ap- will take Disney more than two years Inc. to acquire Time Warner Inc. — pealing to the Murdoch family be- to pare down its debt. which owned CNN, HBO and the cause it would give them a sizable Several analysts said they don’t Warner Bros. film and TV studio — stake in Disney. Fox shareholders think the bidding war is over. in a deal that closed last week. would own 19% of Disney. Moody's analyst Neil Begley cau- Worries about the growing clout of Disney also has offered to absorb tioned that Disney may end up paying tech companies also are driving Dis- $13.8 billion in Fox’s debt, which even more than the offer on the table. ney to bulk up. With the Fox assets, would mean that the company that John Janedis, managing director at Disney could double the size of its TV Murdoch and his son, Lachlan, plan to Jefferies & Co., said he expects Com- and movie production so that it will cobble together with the remaining cast to come back to Fox with a per- have an arsenal of programming to assets would begin operations with a share bid in the low $40 range. compete against Netflix, which is strong balance sheet. The Murdochs Fox shares on Wednesday climbed spending $8 billion this year on con- plan to hold on to Fox News Channel, $3.37, or 7.5%, to $48.08, nearly tent. Disney has its own plans to offer Fox Business Network, the Fox twice their value in October, just be- streaming services to take on Netflix broadcast network, Fox Sports 1 and fore Disney’s interest became public. — and would benefit from Fox’s deep Fox Sports 2 and the company’s chain Disney rose $1.05, or 1%, to $107.15 library of content. of TV stations, including KTTV-TV and Comcast ticked up 58 cents, or “This is the last media asset of Channel 11 in Los Angeles. 1.8%, to $33.39. scale that is available to buy,” Doug Comcast’s all cash-offer does not In the call with analysts, Iger said Creutz, a media analyst with Cowen provide such long-term upside, and its that Disney already has made head- & Co., said in an interview. proposal would have significant tax way in its effort to gain regulatory Also attractive to Disney are Fox’s implications for Murdoch and his approval for its Fox acquisition. The international properties, which main- family. Murdochs have long worried that reg- tain key sports rights, including Star And now Comcast and its tena- ulators might frown on a deal with in India and the Sky broadcast service cious CEO, Brian Roberts, will have Comcast, which owns NBCUniversal in Europe. Those assets would in- to come up with more money. Its in- and cable and high-speed internet dis- stantly turn Disney into a bigger inter- vestors are already jittery over the tribution. However, the Disney-Fox national force. Disney already is a prospects for a bidding war. deal also is expected to draw regulato- household name and has a trove of “Comcast is going to have a tough ry scrutiny because the two compa- beloved characters, including Winnie time going that much higher,” said nies have overlapping assets such as the Pooh; Woody and Buzz Lightyear Mary Ann Halford, a former Fox ex- movie studios that account for nearly from the “Toy Story” franchise; and ecutive who is now a senior advisor half of this year’s box office receipts. Marvel’s Iron Man and Captain with OC&C Strategy Consultants. “We're confident that we have a America. Fox, in its statement, said Disney’s clear path,” Iger said. “We've been “Disney has a great track record amended deal is “superior” to the of- working with regulatory authorities for combining creative cultures to fer made by Comcast. Although the not just in the United States but in drive innovation and growth across Fox board accepted Disney’s offer, jurisdictions across the world now for our businesses, from Pixar, Marvel the deal is subject to shareholder ap- six months, and we've made a lot of and Lucasfilm to ESPN and ABC, and proval. progress toward obtaining the regula- we expect the 21st Century Fox ac- “We … firmly believe that this tory approvals that are necessary.” quisition will be just as successful,” combination with Disney will unlock Beyond cementing his legacy, Iger Iger said in a conference call with even more value for shareholders as may have other reasons to keep the analysts Wednesday. the new Disney continues to set the spoils away from Comcast. Fox’s board compared the two pace at a dynamic time for our indus- "Iger may be concerned that if he bids and quickly approved Disney’s try,” Rupert Murdoch, Fox’s execu- doesn’t do something, then Disney $71.3-billion offer, which includes an tive chairman, said in a statement. may be acquired by some even larger equal mix of cash and stock. “We remain convinced that the com- company — and that’s a legitimate Disney’s offer is designed to ap- bination of 21CF’s iconic assets, fear,” Creutz said. “He wants the peal to a range of investors: Fox brands and franchises with Disney’s company to stay independent — he shareholders could get cash as well as will create one of the greatest, most wants Disney to be Disney.” the long-term value of owning Disney innovative companies in the world.”