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Comcast announces plan to outbid Disney for Fox assets

The all-cash bid would be the most recent move in an ongoing battle for Fox's entertainment assets.
Rupert Murdoch, chairman of Twenty-First Century Fox, in New York last year.
Rupert Murdoch, chairman of Twenty-First Century Fox, in New York last year. Dennis Van Tine / Star Max/IPx via AP

Comcast confirmed on Wednesday that it is working on a plan to challenge Disney's $52.4 billion bid for major parts of Rupert Murdoch's Twenty-First Century Fox empire.

Comcast, which owns NBCUniversal, did not detail the size of its potential offer but said it would be in cash and worth more than Disney's bid, which is in stock, Comcast said in a press release.

Fox shareholders are set to consider the Disney offer in a matter of weeks. Comcast's statement on Wednesday effectively put Fox shareholders on notice that Comcast is seriously interested in buying up Fox's entertainment assets, including its movie studio and some cable channels.

Despite reports of Comcast's potential bid, Fox and Disney have said they are pressing ahead with their planned merger.

All three companies are owners of the online video platform Hulu, which is viewed as a challenger to Netflix. Disney's deal would include Fox's stake in the streaming service, potentially setting Hulu up as the centerpiece of Disney's efforts to launch a streaming service to challenge Netflix.

Reuters reported this month that Comcast was planning to borrow around $60 billion to fund its bid.

In it press release, Comcast noted that it hasn't committed to a bid quite yet, saying "no final decision has been made." Comcast and the rest of the media industry are waiting to see how Judge Richard Leon will decide in the Justice Department's attempt to block AT&T's $85 billion bid to acquire Time Warner. That decision will be made on June 12.

Investor Christopher Hohn in a letter Wednesday called on 21st Century Fox Chairman Rupert Murdoch to entertain a potential offer by Comcast. Hohn, who said his management fund owns 7.4 percent of Fox’s stock, said that he believes Disney’s offer poses a potentially greater regulatory hurdler because of the entertainment giant's cable TV and movie studio holdings.

He said Fox’s board had a responsibility to shareholders to favor the highest bidder, even if it would amount to a greater capital gains tax hit to Murdoch and his family.

“If Comcast formalizes a superior all-cash offer, we would support that offer over the current Disney offer,” Hohn wrote to Murdoch.

Fox had previously rebuffed an offer from Comcast for fear that the U.S. government would block the deal.

Comcast added in the release that it would take into account regulatory risk in its termination fee, a payout that is triggered if the deal is blocked.

Chris Marangi, portfolio manager at Gamco Investors, which is a shareholder in both Fox and Comcast, said that a bidding war could be brewing — but also noted that the companies could reach a compromise.

"This demonstrates that Comcast is serious," Marangi said. "One would expect Disney to counterbid. The other scenario is Comcast and Disney split the assets."

The assets being discussed include Fox's TV and movie production business, its movie studio and its international channels, among other assets. Fox is keeping its U.S. cable news and sports channels and its broadcast network.

Separately, Comcast is involved in another challenge to Fox: It is trying to acquire the U.K.-based satellite broadcaster Sky, which is partly owned by Fox, while Fox is trying to acquire the 61 percent of Sky it doesn't own.

That deal remains in doubt, as Fox has had to overcome a series of roadblocks from the British government, which is still considering Fox's plan. This week, the British culture secretary, Matt Hancock, said he saw no reason to block Comcast's $30.7 billion bid. The government will rule in June.