Comcast wants to spoil Disney's $52 billion bid for much of 21st Century Fox with its own monster offer.
The cable giant is preparing to make a $60 billion cash offer to Fox's film, TV and international businesses, according to Reuters, although that is conditional on a federal judge giving AT&T and Time Warner the nod to complete their own mega-merger. The Justice Department has on antitrust grounds, with a ruling expected next month.
Mergers are notoriously risky -- M&A experts say that roughly three-quarters of corporate tie-ups fail, often wasting huge sums of money and embroiling companies in time-consuming and distracting transactions. So why is Comcast willing to roll the dice with Fox? The answer boils down to four major factors:
The dealmaking efforts has three of the globe's largest media companies vying to remain relevant in the face of intensifying competition, especially from internet and telecommunications players. "As these big groups look to fight off the threat from the likes of Netflix and Amazon, then scale becomes more and more important and you need scale and distribution," Numis media analyst Paul Richards told Reuters.
Comcast and other cable companies are in danger of losing their competitive edge to AT&T after the wireless provider waded into digital content with its 2015 purchase of DirecTV. That deal made AT&T the largest provider of pay TV. AT&T's proposed $85 billion purchase of Time Warner, whose assets include CNN and "Game of Thrones," would give it even more heft as a producer of broadcast, TV and online content.
Comcast's possible Fox bid would include the latter's 30 percent stake in Hulu. Comcast and Disney also hold 30 percent of the streaming service, so the winning bidder would gain control of Hulu, helping it compete with the likes of Netflix and Amazon.
Disney's deal for Fox was announced in December, a month after Comcast made a higher all-stock offer to purchase the same assets. The regulatory hurdles involved with a possible Comcast purchase one reason Fox accepted Disney's lower bid. But federal approval for the AT&T-Time Warner deal could clear a legal path for Comcast to make another run at Fox. "Comcast and Disney are likely to view this as the last remaining transformational deal in media," according to Jefferies analyst Scott Goldman, who believes Disney would sweeten its offer should Comcast make another play for Fox.