Comcast and Verizon in bid approach for 21st Century Fox

Comcast and Verizon have separately approached Rupert Murdoch's 21st Century Fox to explore potential combinations with the media company, a week after it emerged that Fox had held similar talks with Walt Disney.

Comcast and Verizon are interested in acquiring some of Fox’s entertainment assets, including its film studio, cable channels and stake in Sky, the European pay-television group, according to people familiar with the approaches.

Mr Murdoch’s willingness to engage in discussions with potential acquirers signals that he is considering a break-up of the media empire that took him decades to assemble.

Comcast, America's largest cable operator, owns NBC Universal – the owner of the NBC broadcast network, a portfolio of cable channels and the Universal film studio. Fox has a similar portfolio of assets but lacks Comcast's distribution infrastructure.

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The interest of Verizon, the US telecoms group, in Fox follows rival telecoms group AT&T’s agreed deal to buy Time Warner, which has run into regulatory difficulty.

The talks come at a tumultuous time for the media industry, which is under pressure from technological upheaval, changes in viewing habits and the global rise of digital streaming video. Content owners, distributors and disruptive technology companies are jockeying for control as they prepare for an expected round of consolidation.

Decision

One source said Comcast’s decision to initiate talks came after reports that Disney had held talks with Fox about buying its movie studio, cable channels and international business. That combination would exclude Fox’s broadcast network and Fox News Channel, as well as its sports rights.

The talks between Comcast and Fox were described as “exploration” and “early” by two separate people briefed on the discussions. The two sides are aware that any combination would face serious regulatory hurdles, potentially requiring big carveouts, those people added.

Shares in Fox jumped more than 8 per cent in after-market trading, giving Mr Murdoch’s company a market value of about $53 billion.

If Mr Murdoch goes ahead with a sale of the entertainment assets he would be left with the Fox broadcast network, the Fox News cable channel, sports rights and the newspaper assets held within News Corp, which he also controls.

People close to the Murdoch camp have speculated that he and his family might then seek to combine the remaining Fox news and sports assets with the newspapers – and take the company private.

This week the 86-year-old mogul acknowledged the impact of the internet on his newspaper portfolio.

Struggling

“So far I think we have done pretty well in replacing lost advertising revenue in the major papers, but it continues to be a big problem,” he told News Corp investors at the company’s annual meeting.

"I think the big three successes we have are the three big national papers: the Wall Street Journal, the Times in London and the Australian. The other papers, a lot of them are still very viable, but they are struggling."

Amid the consideration of possible business combinations in the media sector, all eyes are on the outcome of AT&T's $85.4 billion attempt to buy Time Warner, the owner of CNN, HBO and the Warner Brother movie studio.

The US Department of Justice (DoJ) has asked AT&T to sell either the media company’s cable networks, including CNN, or DirecTV, which is AT&T’s satellite broadcaster, to win approval for the deal. AT&T has said it would not sell CNN and has vowed to take the DoJ to court if a settlement cannot be reached.

Makan Delrahim, the head of the DoJ’s antitrust unit, has made it clear several times in recent weeks that he is opposed to deals where distributors of media and news also control content producers.

The competition watchdog has also singled out Comcast’s acquisition of NBCUniversal as a case study of why so-called behavioural remedies — where the owner of a combined company vows not to act in an anti-competitive manner — do not protect consumers’ interests.

Analysts have speculated that if AT&T was unable to buy Time Warner, Mr Murdoch might make a bid for the company, which he unsuccessfully tried to buy in 2014. However, one person with knowledge of the situation said Mr Murdoch no longer harboured ambitions to acquire Time Warner.

Ownership

Mr Murdoch has called Randall Stephenson, chief executive of AT&T, in recent months, asking if he would consider selling CNN, said a source.

Meanwhile, Fox continues to try to complete its takeover of Sky, which it has been pursuing for close to a decade.

Sky has threatened to close Sky News if its ownership of the channel becomes a regulatory impediment to the proposed £11.7 billion takeover of the European pay-television operator.

Sky warned last week in a submission to the UK’s Competition and Markets Authority, which is scrutinising the deal, that the continued operation of Sky News should not be assumed in light of concerns that the Fox takeover could harm media plurality in the UK.

– Copyright The Financial Times Limited 2017