Publication Date: July 11, 2018
With its latest bid for the Fox assets at $71.3bn and a deal structure that has appeased Fox’s Board, Disney is currently in pole position with its superior offer. Moreover, shareholder votes scheduled for 27-Jul-18 and recent antitrust clearance by the Department of Justice have additionally put Disney ahead in the regulatory and timing race. Despite these attributes, investors should not count out Comcast CEO Brian Roberts, who still has everything to play for. Should Comcast pursue a counterbid, it will need to put enough clear space between its offer and Disney’s such that the Comcast bid surmounts reasonableness criteria applicable to Fox’s board when discharging their fiduciary duties under Delaware law. In this report we compare the pending offers, explore conflicts of interest and assess, based on precedents, Fox’s ability to ignore a future, financially superior offer from Comcast. We also explore Comcast’s pro forma leverage and whether it can counterbid without a partner while remaining investment grade-rated. Finally, we dissect the regulatory risks identified by Cleary Gottlieb and provide trading recommendations based on the expected risk / reward.
1. Deal Structures and Fox Shareholder Preferences 2. Pro Forma Leverage Analysis and Comcast’s Capacity to Counterbid 3. Fox RemainCo Valuation at Various Offer Levels 4. Hostile Bid? Governance Dynamics and Conflicts of Interest 5. Can Fox Reject Comcast to Accept a Lower Offer? Delaware Law Precedents 6. Antitrust Issues; Questioning the Cleary Gottlieb Assessment 7. Risk / Reward and Risk Arbitrage Trading Thoughts
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