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Disney counter-punches with $71.3 billion bid for Fox's crown jewels

The new agreement comes after Comcast bid $65 billion just a week ago.
A crowd watches fireworks at Cinderella's castle in Walt Disney World in 2012.
Spectators watch fireworks at Cinderella's castle at Walt Disney World in 2012.Scott Audette / Reuters File

The bidding war between Disney and Comcast is heating up.

Disney announced on Wednesday a new agreement to acquire entertainment assets from 21st Century Fox, upping its offer to $71.3 billion.

Disney's bid comes over the top of Comcast, which offered $65 billion just a week ago for the pieces that Fox is looking to sell, which include its movie and TV production businesses, cable TV channels including FX and National Geographic, and two major international TV distributors, Sky in Europe and Star in India.

In December, Disney stepped up with an offer worth $52 billion in stock, which is viewed as a way to avoid a large tax charge.

Fox's broadcast network and Fox News, among other pieces of 21st Century Fox, would not be part of the deal.

The fresh bid adds to the ongoing narrative in the media world that bigger is better. AT&T recently completed its $85.4 billion acquisition of Time Warner, creating the newest content-and-distribution media hybrid.

Robert Iger, CEO of The Walt Disney Company, said in a statement that the company wants Fox's assets to help it expand globally and create direct-to-consumer services, which newer entrants Netflix and Amazon already offer.

“At a time of dynamic change in the entertainment industry, the combination of Disney’s and Fox’s unparalleled collection of businesses and franchises will allow us to create more appealing high-quality content, expand our direct-to-consumer offerings and international presence, and deliver more personalized and compelling entertainment experiences to meet growing consumer demand around the world," Iger said.

Disney had previously made its bid in the form of Disney stock, while Comcast had offered cash. Disney's newest offer allows Fox shareholders to choose stock or cash, a move that could help convince Fox shareholders to favor its bid — and help avoid potential problems around media ownership regulations.

Comcast declined to comment. Comcast is the owner of NBCUniversal, the parent company of NBC News.

The new Disney bid is the fourth offer on the table. Fox executive chairman Rupert Murdoch was initially approached by Comcast CEO Brian Roberts late last year, though that bid, of unknown size, was rejected.

The bidding war highlights the urgency with which Comcast and Disney are trying to add to their content libraries and expand their international reach.

Both companies would benefit from Fox's content and distribution assets, each of which are seen by media analysts as necessary to compete for consumers who are turning away from traditional media channels in favor of the on-demand offerings of tech companies.

"In a nutshell, if Comcast won these assets from the arms of Disney it would be a devastating and hard to recover blow to [CEO Bob Iger] and Disney's streaming ambitions going forward, which speaks to Disney's very aggressive bid today," wrote Daniel Ives, head of technology research at GBH Insights, in an investor note.

While Comcast already has a direct relationship with viewers through its cable and internet systems, Disney has little insight into who is watching its shows and how to best monetize those habits.

Disney is working on its own direct-to-consumer service with the help of streaming video platform Bamtech, which it acquired in August 2017. Disney has said its own Netflix-style service is set to launch in 2019.

The U.S. Justice Department has already been examining the initial Disney-Fox deal and is asking the market for their comments as part of a second round of questioning to help it understand the impact of the combination, according to a source close to the investigation who was not authorized to speak publicly on the matter.

The Justice Department declined to comment.

The Disney press release mentioned it had made adjustments to its agreement to make it more friendly to regulators, though it did not say what those were. Concentrated ownership of regional sports networks (RSNs) is thought to have been a potential concern for a prospective buyer. Comcast already owns RSNs, while Disney has a major place in national sports with ESPN.

The Murdoch family must be careful that any new Disney shares they receive do not give them more than 5 percent ownership of the company, as anything larger would trigger an action by the Federal Communications Commission, which limits ownership of broadcast networks. 21st Century Fox owns the Fox broadcast network, while Disney owns ABC network. Under Disney's earlier deal, the Murdoch family would have gained around 4 percent of Disney.