Friday, July 6, 2018

Bidding War for 21st Century Fox To Heat Up

Wall Street is warming up to the idea that the bidding war for 21st Century Fox assets isn't over just yet.

"I do think that it's likely," RBC Capital Markets analyst Steven Cahall told Business Insider, referring to the chances Comcast makes another bid for 21st Century Fox assets.

In late June, Disney agreed to a deal that values 21st Century Fox's assets, excluding the Fox News and Fox Business channels, at $71.3 billion. That agreement outdid Comcast's $65 billion offer, which itself bested Disney's initial December bid of $52 billion.

Comcast has roughly $6 billion in cash, compared to Disney's $4 billion. "If it has to be an all cash bid, it would suggest that Comcast is in a stronger position," he added.

But after Disney and 21st Century Fox agreed to the latest offer, Jefferies analyst John Janedis predicted that "given the strategic importance of the 21st Century Fox assets, we expect Comcast will come back with a higher offer." He predicted one that would value the 21st Century Fox assets at $80 billion.

And as of Thursday morning, Janedis isn't alone. In a note sent out to clients, Cahall predicted Comcast could indeed make another bid. "Comcast will similarly approach Fox focused on post-RSN leverage so we wouldn't be surprised to see Disney and Comcast bidding into the $40s," he wrote. Any buyer of the assets would have to divest the regional sports network.

The price of 21st Century Fox's assets is being driven up due to their scarcity, according to Cahall. "There is a certainly scarcity premium here that defies the way we normally look at multiples," he said. "These are hugely strategic assets that cannot be necessarily replicated through organic investment."

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