Walt Disney and Comcast Corporation are competing neck to neck for the acquisition of 21st Century Fox (21CF). Disney made the first move by offering $52.4 Billion to acquire 21CF TV and Film studios. Countering the move, Comcast made a $65 Billion offer for the same assets. In return, Disney made a $71.3 Billion offer and the response from Comcast is awaited. However, fair value assessment of the assets remains as a challenge for analysts.
Market capitalization of 21CF as of 22nd June is $89 Billion. 21CF is retaining it’s high growth and fledgling channels (Fox News, FS1 and FS2). According to Guggenheim securities, the worth of these assets is around $21.3 Billion. And the value of the assets put for sale is around $67.9 Billion. Essentially, Disney has offered a premium of $3 Billion for the acquisition. Is this amount really worth it? Can both the companies together generate better synergies? Does the customer benefit from the acquisition? Do these companies have government approval? Are the important questions that need to be answered.
Recently, the Federal court gave a go-ahead for the acquisition of Time Warner by AT&T. These mergers may not be a part of the larger strategy but a mere necessity. Amazon and Netflix have already made us glued to our screens. As per Statistica, they have already captured 30% of the market. Moreover, the market for video streaming would be doubled by 2021. So, consolidation of the industry is inevitable to capture the market. Government’s argument that these mergers lead to anti-competitive practices is an unsubstantial concern. If AT&T and Disney do not consolidate, it may lead to loss of huge market share.
The merger will significantly complement Walt Disney business. Popular properties such as X-Men, The Simpsons, and Avatar would join Disney’s portfolio making it the supreme leader in entertainment. Also, the global presence of 21CF, its unique content and capabilities would supplement Disney’s business. Customers will also have the opportunity to experience the combination of X-Men, Fantastic Four, Deadpool and so on which are individually owned by these companies.
In this whole drama, the stockholders of 21CF are the largest beneficiaries. Within a span of a month, the stock price surged 28%. Prior to the present deal, Disney offered $28 per share and now the offer stands at $38 per share. If Comcast comes up with a new bid, then none can be happier than 21CF stakeholders. However, being a debt-ridden company, Comcast Corporation may not bid higher. It is now in the hands of Disney to foster its creativity and showcase various combinations together. If Wonder Women could help Batman and Spiderman could help Ironman, then why not Deadpool come to the rescue of Fantastic Four?