Rumours of 21st Century Fox Inc’s [FOXA:NSQ] decision to enter into negotiations with Disney [DIS:NYQ] to sell off its entertainment assets stunned the financial markets in very early 2018. By early May 2018 a $52bn all-share (or $66bn including assumed debt) deal to purchase the entertainment assets of Fox was put together by Disney. This would be taken to a vote on July 10th 2018.
Unexpectedly though, Comcast [CMCSA:NSQ] decided to “gatecrash” the deal and on 23rd of May 2018 news broke that they were in advanced talks regarding a rumoured rival $60bn all-cash offer to 21st Century Fox’s shareholders. On the 14th of June Comcast launched a formal $65bn takeover bid for the Fox assets. Comcast own NBCUniversal, and like Disney, could see considerable synergies of the Fox assets with its current media properties. The 10th of July vote was delayed until 27th of July as shareholders digested this news.
Below is an excerpt from the Financial Times Lex Column on 30th of May 2018 that gives an overview of the decisions facing the shareholders of 21st Century Fox:
It has already been a long week for Walt Disney. Between the racist antics of sometime TV star Roseanne Barr and the box office disappointment of Solo, its latest Star Wars instalment, good news has been in short supply. Rupert Murdoch’s 21st Century Fox is about to decide whether it wants to ride such high and lows at the House of Mouse. On Wednesday, Fox announced it would hold a shareholder vote on the proposed combination with Disney on July 10.
Lurking in the background is an expected but not-yet-disclosed bid for Fox’s assets from Comcast — whose entreaties Mr Murdoch has already rejected.
The ostensibly competing offers are tricky to compare. Comcast has lined up as much as $60bn in financing to support its all-cash bid for Fox’s entertainment assets. Disney’s all-stock offer is currently worth just over $50bn. The gap is misleading because Comcast is offering to cash out Fox shareholders by paying them upfront for transaction synergies.
With Disney, Fox shareholders get to share in any future prosperity. Yet this does not represent pure upside. The Mouse reported a good first quarter but its shares are already down a tenth in 2018 over worries about the viability of legacy media. Shares in rival Netflix are up 74 per cent this year. The streaming service’s market value of $150bn has zoomed past Disney’s even as its forecast 2018 revenue is just a quarter that of the Magic Kingdom.
Adding to the complexity is that activist investment fund TCI in late April 2018, on rumours of a possible rival Comcast bid, acquired a 4% stake in 21st Century Fox which it later increased to 7.4%. In late May the FT reported that Sir Christopher Hohn, the activist investor behind TCI, sent a letter to the board of 21st Century Fox urging them to not be swayed by the considerations of a single shareholder and reminding them of their fiduciary duties to get the best deal possible for all shareholders:
“We are aware that the Murdoch family has a potential conflict of interest because of capital gains tax, which could lead them to preferring a lower priced Disney stock offer, to a higher priced offer from Comcast. However, the personal tax position of the Murdoch family must be an irrelevant consideration for the board, in order for the board to comply with their fiduciary duties. It is imperative that the 21st Century Fox board runs a fair auction . . . and sells it to the highest bidder”
In an academic essay format, you are to consider the competing bids between Disney and Comcast to acquire the assets of 21st Century Fox. Financial Times news articles regarding the acquisition can be found below to support students:
You are expected to use this articles and your access to FT resources as the starting point in your wider investigation and research into the deal. You should be using further resources beyond this initial starting point.
Specifically, you are to choose two of the following three tasks and write a single academic essay that addresses both of the tasks selected (50 marks).
Your answers should specifically be written in an academic essay format and not in the format of a business report. Essays specifically should not include headings, section headings, etc. Your essay should concentrate particularly ensure that there is considerable flow and cohesion between the paragraphs.
The word count is to be declared on the front page of your assignment and the assignment cover sheet. The word count does not include:
• Title and Contents page • Reference list • Appendices • Appropriate tables, figures and illustrations
• Glossary • Bibliography • Quotes from interviews and focus groups.
Please note, in text citations [e.g. (Smith, 2011)] and direct secondary quotations [e.g. “dib-dab nonsense analysis” (Smith, 2011 p.123)] are INCLUDED in the word count.
Assignment guidance at https://northumbria.hosted.panopto.com/Panopto/Pages/Viewer.aspx?id=501f846f-fe13-4b52-8c0b-a91100c44f67