Jefferies: The Fate Of Fox Depends On The AT&T-Time Warner Merger Trial

Comcast Corporation (NASDAQ: CMCSA) is reportedly preparing an all-cash bid for Twenty-First Century Fox Inc Class A (NASDAQ: FOXA)’s entertainment assets, forcing Fox to choose between two powerful distributors.

Whether it wants Walt Disney Co (NYSE: DIS) or Comcast remains irrelevant until the AT&T Inc. (NYSE: T)-Time Warner Inc (NYSE: TWX) ruling is issued, according to Jefferies.

The Rating

Analyst Scott Goldman maintained a Buy on Comcast with a $50 price target.

The Thesis

By Jefferies assessment, Fox’s fate depends on a favorable ruling for the AT&T-Time Warner deal, which similarly involves a hegemonic content distributor and prolific content creator. (See Goldman's track record here.)

The Street expects a judgment by June, which gives Fox’s bidders more time to adjust their proposals.

“It is reasonable to expect Disney to counter any potential offer while also changing the composition of its current all-stock offer,” Goldman said in a note. “In our view, Comcast and Disney are likely to view this as the last remaining transformational deal in media.”

Disney originally agreed to buy Fox for $52 billion with Comcast seeking Sky for $30 billion. By Jefferies' estimates, Comcast’s proposed all-cash, $60-billion purchase of Fox is seen to boost Comcast’s pro forma leverage to about 4.5 times.

“The acquisitions of both FOX and Sky for nearly $100 billion in all-cash would dramatically change the company's leverage profile,” the analyst said. 

Price Action

Comcast was set to open down 1.5 percent at $31.89 at the time of publication Tuesday. 

Related Links:

Rosenblatt: Comcast Challenge For Fox Assets Could Reduce Arbitrage Discount

Everything We Know About Disney's Bid For 21st Century Fox Assets

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