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Walt Disney [NYSE:DIS] will ramp up a process to divest sports channels following shareholder votes this week on its bid to acquire much of Twenty-First Century Fox [NASDAQ:FOX], said a source and a person familiar with the matter.
The companies are confident of securing Fox and Disney shareholder approval going into the separate vote on 27 July, the person said. Shareholders from both media companies are required to vote on the deal.
Last month, Burbank, California-based Disney agreed to raise its offer for Fox assets to USD 38 per share in order to see off a rival bid from Philadelphia-based media and cable company Comcast [NASDAQ:CMCSA]. In December, Disney and Fox initially agreed to a deal that will see the latter, New York-based media and entertainment company sell a collectioin of assets to Disney. The deal includes Fox’s movie studio, cable networks National Geographic and FX, subsidiary Star India and stakes in Sky [LON:SKY], Endemol Shine Group and Hulu. The rest of Fox will be spun off into a new company.
The original deal envisioned Fox selling its regional sports networks (RSNs) to Disney, but the Department of Justice (DoJ), in approving the deal last month, required the companies to divest those assets. The 22 RSNs could be valued at around USD 20bn, according to news reports.
The DoJ gave the parties an unusually broad period of time to complete the divests – 90 days following the closing of the transaction, with another 90-day extension possible – providing Disney ample space to prepare to conduct the process in the way that best benefits the company, the source and the person said. The process is likely to gather momentum in the fall, the source said.
A report in Reuters prior to Comcast announcing that it had dropped its pursuit of Fox said that Comcast was seeking to pre-emptively line up buyers for the RSNs to ease antitrust concerns. According to the article, Comcast had approached Apollo Global Management [NYSE:APO] and The Blackstone Group [NYSE:BX] about a potential transaction.
Apollo is still evaluating the RSN assets in the context of Disney’s planned divestiture, the source said.
Disney has yet decide how to sell the assets, the person said. It is unlikely that each RSN will be sold individually, but the number of packages of RSNs remains an open question, the source said.
A sector executive and the source named broadcasters like Sinclair Broadcast Group [NASDAQ:SBGI], Nexstar Media Group [NASDAQ:NXST] and TEGNA [NYSE:TGNA] as potential suitors, as well as MSG Networks [NYSE:MSG]. The source said that broadcasters could look to partner with other companies or sponsors. The circle of potential buyers will be widened if the RSNs are divested in smaller, cheaper packages, the source said.
Disney declined to comment. Fox did not respond to requests for comment. Apollo declined to comment.
by Jonathan Guilford in New York and Victoria Turner in Washington, DC
As seen in the Mergermarket newsletter, an Acuris company, on 25/07/2018