Would one of the internet or technology heavyweights — Google, Facebook, Apple or Amazon — want to own 20th Century Fox Film or other chunks of Rupert Murdoch’s media empire?
At least one Wall Street analyst believes there’s a chance a major tech player will jump into the high-stakes bidding war for 21st Century Fox’s entertainment studio, FX cable networks and other assets.
In a move that surprised no one, Comcast officially extended an all-cash offer for Fox on Wednesday, with its $65 billion proposal topping Disney’s stock bid by 19%. In response, 21st Century Fox said it was weighing the offer and that it hasn’t determined whether to postpone or cancel the scheduled July 10 shareholder vote on the Disney proposal.
That could open the door for yet another spoiler bid, according to B. Riley FBR senior analyst Barton Crockett. A delay on the Fox shareholder vote “could afford extra time for another player to get into the fray, such as a tech/internet company, which we would not rule out,” he wrote in a research note.
Why would a tech company want 21st Century Fox’s traditional-media portfolio? As Crockett put it, “Fox’s content assets are uniquely impactful in the U.S., and its market-leading video presence in India, via Star, is potentially appealing to internet companies targeting the subcontinent.”
One factor to consider: Apple and Alphabet (Google’s parent) have massive cash hoards and could top Comcast’s $65 billion bid for Fox without so much as blinking. Apple has some $267 billion in cash and equivalents, and Alphabet has around $103 billion.
To date, though, the big tech and internet companies have pursued original content by building their own in-house studio operations or by acquiring third-party productions, rather than trying to gulp down — and digest — a traditional Hollywood property.
Comcast’s $35-per-share offer is a very high multiple, “and we’re not convinced it goes much higher” unless a big technology company steps into the mix, Crockett opined. The analyst estimated Comcast’s bid for the Fox assets as 17 times earnings before interest, tax, depreciation and amortization (EBITDA); factoring in an estimated $2 billion in cost savings, Comcast’s bid is a 12X EBITDA multiple. By contrast, Disney’s bid is 14X EBITDA (pre-synergies) and 10X (post-synergies).
Disney may or may not come back with a higher price tag. At this point, it’s hard to say who will win the 21CF assets, MoffettNathanson’s Craig Moffett wrote in a blog post Thursday.
“Comcast CEO Brian Roberts certainly seems intent on owning Fox,” he wrote. “But Disney still has the advantage of using a combination of stock and cash.” Despite Rupert Murdoch’s position that he would take the highest bid, Moffett added, “one can assume that tax-efficient stock issuances remain more attractive than cash.”
The one sure thing? The Murdochs are in the catbird seat, Moffett wrote: “It’s good to be Fox.”