Wall Street has a feeling that Comcast (CMCSA) is not done with 21st Century Fox (FOX). Analysts believe there is a chance that Comcast could come back with a higher bid for Fox while Disney (DIS) is not going to let go of the Rupert Murdoch-owned company easily.
Disney and Comcast have been outdoing each other with their bids which have gone from a range of $50 billion to more than $70 billion now, showing that both companies are willing to pay heavily for Fox’s assets which are of great value to both of them. Analysts believe the bidding war could take the value of Fox’s assets to as high as $80 billion. Disney has already received regulatory approval to acquire Fox.
While Comcast has the balance sheet strength and cash reserves to take its bid higher, Disney is capable of bringing forth a cash and stock combination that can match any offer Comcast might make. The condition of divesting the regional sports networks will apply to whoever manages to acquire Fox. The winner will also see their debt levels increase but both firms are strong enough to handle this burden.
The acquisition of Fox will help Disney strengthen its streaming service. It will give the Pixar-owner access to plenty of content including popular TV shows like The Simpsons and Modern Family. Through this deal, Disney will gain a majority stake in Hulu which will be a huge benefit. The acquisition will also help boost Disney’s international presence with a share of Sky plc (SKY) in the UK and the ownership of Star in India.
Disney will also gain access to some renowned movie franchises which have the potential to generate earnings in the form of reboots, sequels or spin-offs. This opens up fresh revenue streams for Disney. All in all, both Comcast and Disney will not let go of Fox without a tough fight but this also means that one of them could end up overpaying for Fox’s assets. That will not be a ‘happy ending’ for the winning company’s investors.
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