Disney wins U.S. approval for Fox deal in blow to Comcast

Battle For Fox Antitrust
The 21st Century Fox logo outside its New York office.

Walt Disney Co. won U.S. antitrust approval for its $71 billion purchase of 21st Century Fox Inc.’s entertainment assets, raising hurdles for a potential rival bid from Comcast Corp.

Disney agreed to sell Fox’s 22 regional sports networks to resolve the Justice Department’s concerns that the deal would raise prices for cable sports programming in local markets, the department said Wednesday.

The approval is a victory for Disney in its battle with Comcast for one of the media industry’s biggest prizes. Fox last week accepted a sweetened bid from Disney, which increased its offer following Comcast’s competing $65 billion bid. The $38-a-share price is about $10 a share higher than what Disney offered in December — and $3 above Comcast’s bid.

Comcast still has time to respond. Fox canceled a shareholder meeting to vote on the Disney deal that had been planned for July 10. Comcast is now mulling its next steps, including possibly teaming up with private-equity investors in its pursuit of Fox assets, a person familiar with the situation said Wednesday. Wall Street expects the cable giant to come back with a counterbid.

“Today’s settlement will ensure that sports programming competition is preserved in the local markets where Disney and Fox compete for cable and satellite distribution,” said Makan Delrahim, the head of the department’s antitrust division.

If the bidding reaches a high enough level — say, $90 billion — the company may go to private equity firms or other backers for help, the Wall Street Journal reported earlier. In one scenario, a strategic investor could take on Fox’s U.S. assets — including the 20th Century Fox studio and regional sports networks — and leave Comcast with overseas assets.

Disney must sell the regional sports networks to a buyer acceptable to the U.S. within 90 days of closing on the Fox deal.

The Disney-Comcast contest will determine who controls much of Rupert Murdoch’s empire, including Fox’s movie and TV studios, television networks such as FX, a controlling stake in Hulu, and multichannel providers such as Star India and Sky Plc. At stake is a trove of media properties ranging from The Simpsons to  X-Men.

Disney and Comcast are looking to use the Fox assets to bolster their content, expand overseas, and fend off the threat from Netflix Inc. and other streaming upstarts. That threat prompted AT&T Inc. to buy Time Warner Inc., a deal the government challenged and lost at trial earlier this month.

Disney and Comcast have traded jabs over which bid would face an easier path to regulatory approval, an important consideration for Fox stockholders, who must weigh which deal to accept.

When Comcast made its bid for Fox, Comcast chief executive officer Brian Roberts said in a letter to Murdoch and his sons that he is “highly confident” that Comcast will “obtain all necessary regulatory approvals in a timely manner and that our transaction is as or more likely to receive regulatory approval than the Disney transaction.”

Disney was down 0.29 percent to close at $103.96, while Comcast was down 1.49 percent to close at $32.29. Fox was up 1.86 percent to close at $48.30.