The Rebooted "Keep Hope Alive" (that the rights can revert back to Marvel) Thread - - - - - - - - - Part 18

[Willie Lumpkin]

I think next up we'll see:

1) 21CF's board adjourn or postpone the July 10th shareholder meeting. There's a small chance they could reject Comcast's current bid and keep their FOR recommendation for the shareholders
2a) Disney does nothing in the unlikely event 21CF's board rejects CMCSA's offer
2b) Disney counters and matches Comcast's bid with stock and cash offer. Probably lower stock and higher cash (32.5B stock, 32.5B cash). Probably a seat at the board from one of the Murdochs. Higher break up fee guarantee.
2c) Disney ups their all stock offer going for 1 DIS for every 3 FOX/FOXA shares. That would bring the offer to about $35/share as well and depending on how DIS is at time of closing (say if it's $125 or whatever) it could offer a significant premium. Tax deferred on top of that. This would dilute DIS stock though and it would be overpaying for FOX IMO
3) CMCSA could up their offer, probably to as much as $40-45 per share, which would bring it up to a ridiculous 80-85B+ equity. On top of that they would have to assume Fox's 14B debt and pay Disney 1.525B and have a guaranteed break up fee.

If #3 happens I believe Iger walks away with 1.525B. FOX is not worth 65B IMO, let alone 85B+. It would be interesting to see the reaction from Comcast shareholders (who are not voting to approve this bid).

If Comcast had bid a flat $60 billion without covering the break-up fee, I think Fox's board would have had sufficient cover to say it wasn't enough to stop the presses. At $65 billion with the break-up fee covered, I think it would be pretty risky to not at least pretend to be seriously considering it.

Disney still might wait for comment just on the off-chance the Fox board does say they're not considering the Comcast offer, but in that case, the board would likely be facing a shareholder revolt. So there's almost zero chance Disney walks away cleanly with the current bid.

Maybe they'd take their chances on a shareholder vote between the two current bids, but that would be highly risky since they'd likely lose that vote. But maybe they don't really want it at anything higher than they're currently offering (unlikely since we heard they were lining up capital weeks ago), in which case they should stand firm, let the voters decide and walk away if it doesn't go their way.

I think they'll increase their bid, but it does make sense to let things settle for a bit, get some comment from the Fox board, and then submit their bid later rather than sooner, so they can at least give the impression of being cool and deliberative.

 

[Dark Raven]

What if Comcast offer to up their bid, cover the break-up fee and get Josh Trank and the Fant4stic cast back for a reboot? Will Fox seriously consider them then?

 

[Iceman]

Bloomberg:

Comcast Wins European Union Approval for Sky Bid

 

[Big Bang]

1. Disney has the bigger market cap. That's the bottom line, right? Cut and dried. Done deal. Pack it up. Or am I oversimplifying things?

Bit of an oversimplification. Like I said, corporate structures, etc., can get very complicated. Having a big market cap does not always directly translate into buying power. For example, look at how many analyst are worried about how much debt Comcast would accumulate if they go insane and spend $100+ Billion getting Fox and Sky. the same holds true for AT&T who just closed the deal on Time Warner. It comes back to how well a business can leverage the assets they built up so much debt to make their money back and pay down that debt. The company's overall solvency will usually determine how much they can borrow.

Look at how well Disney has leveraged Pixar and Marvel (LucasFilm to a lesser extent). That is the kind of outcome investors hope to see, whereby the cost of acquisition is not only covered, but profits continue to roll in. Marvel has pulled in or around ~$10 Billion in ticket sales for example, on an acquisition of ~$4 Billion. Granted they didn't get every penny of that $10B, but from that we can extrapolate that they probably made a very healthy profit for merchandise and other licensing revenue. Boils down to basically this: the Marvel acquisition has essentially paid for itself and is now printing money for Disney.

Just having a bigger market cap doesn’t necessarily mean you have the bigger borrowing capability. There are a lot of other factors ( just like the value of your house doesn’t dictate mortgage size and terms - if you’re unemployed, you’re going to have trouble getting a $480,000 mortgage on a $500,000 house). With that said, not only can Disney probably borrow more, but they should be borrowing far less anyway because their offer will likely remain primarily stock.

Why not go to all they can spend now? Because they want to spend as little as possible and Fox may not be worth more than $70 billion. Disney is only going to spend, at most, what they think it’s worth.

If Disney goes to $100 billion, and Comcast never intended to bid more than $70 billion, Disney just threw away $30 billion.

Yep, and Comcast could very well be trying to get Disney to put itself into a situation where they get saddled by debt and cannot take part in any future opportunities that may arise from more media consolidation.

If Comcast buys Fox, and if they decide to make a crappy film just to hang on to the rights, I am going to lose my s***. Seriously, I can’t even imagine how I’ll deal with that if it happens... but we’re still a long way from that point.

I'm there with you. In fact there is a high level of potential that the market (to a larger extent) may reject Marvel films from Comcast. The public has already been promised the potential of a bigger, unified MCU. Anything less than that could very well be disregarded. We can't underestimate the current mindshare of the MCU.

I think next up we'll see:

1) 21CF's board adjourn or postpone the July 10th shareholder meeting. There's a small chance they could reject Comcast's current bid and keep their FOR recommendation for the shareholders
2a) Disney does nothing in the unlikely event 21CF's board rejects CMCSA's offer
2b) Disney counters and matches Comcast's bid with stock and cash offer. Probably lower stock and higher cash (32.5B stock, 32.5B cash). Probably a seat at the board from one of the Murdochs. Higher break up fee guarantee.
2c) Disney ups their all stock offer going for 1 DIS for every 3 FOX/FOXA shares. That would bring the offer to about $35/share as well and depending on how DIS is at time of closing (say if it's $125 or whatever) it could offer a significant premium. Tax deferred on top of that. This would dilute DIS stock though and it would be overpaying for FOX IMO
3) CMCSA could up their offer, probably to as much as $40-45 per share, which would bring it up to a ridiculous 80-85B+ equity. On top of that they would have to assume Fox's 14B debt and pay Disney 1.525B and have a guaranteed break up fee.

Fox's next move is certainly going to be the best indication to what comes next. I'll hold out hope that they stay the course, going with wanting a piece of the Disney-pie. Ultimately, I think shareholders want a stake in the coming media consolidation, and probably prefer having more Disney in their portfolio (and having a say) vs. being a vassal to Roberts. Comcast's cash offer traditionally would be the better offer, but it may that the majority of shareholders prefer the long game.

 

[Big Bang]

Bloomberg:

As expected. Next I expect Sky will show preference to Comcast's offer.

Meanwhile, at least articles are getting more interesting:

Even if Comcast Snags Fox, Disney Could Still Snatch Up the X-Men for the MCU


Disney & Comcast May End Up Splitting Fox's Assets

 

[Willie Lumpkin]

Bloomberg:

Might not matter if they spend $100 billion on Fox and have nothing left.

 

[Detective Conan]

As expected. Next I expect Sky will show preference to Comcast's offer.

Meanwhile, at least articles are getting more interesting:

Even if Comcast Snags Fox, Disney Could Still Snatch Up the X-Men for the MCU


Disney & Comcast May End Up Splitting Fox's Assets

Richard Greenfield has said that splitting the assets would be a “anti-trust nightmare.”

 

[Big Bang]

Richard Greenfield has said that splitting the assets would be a “anti-trust nightmare.”

I'm not so sure anymore about that. The AT&T trial has put a whole new spin on the media landscape.

 

[Crimz]

Richard Greenfield has said that splitting the assets would be a “anti-trust nightmare.”

I don't understand why that would be the case. Shouldn't it be better?

 

[Big Bang]

Furthermore, Comcast's EU approval for Sky is Unconditional, whereas Fox's was contingent on a commitment to divest Sky News. Probably another indicator that Sky is going to go with Comcast. The only thing that would prevent that at this point is a separate bid from Disney. Who has yet to do so, or go through the regulatory process.

Advantage: Comcast

If Comcast obtains the 39% of Sky from Fox, then they won't need further regulatory review, and the DOJ doesn't apply there. If there were to be a split, and Comcast focuses on the international assets, then the DOJ doesn't review the Comcast side of it either. It would for all intents and purposes, be a Disney-only review. Assuming a split were to occur.

 

[Willie Lumpkin]

I'm there with you. In fact there is a high level of potential that the market (to a larger extent) may reject Marvel films from Comcast. The public has already been promised the potential of a bigger, unified MCU. Anything less than that could very well be disregarded. We can't underestimate the current mindshare of the MCU.

This is why I'm still remaining (relatively) calm even though it seems more likely than it did a week ago that Comcast could buy Fox.

It would be foolish for Comcast to make an FF film without Disney for numerous reasons, and now that Disney/Marvel/Kevin Feige have smelled it, I don't think they're going to let those rights slip away without some effort.

In a worst-case scenario - Comcast buys Fox and Disney gets nothing, Comcast will be short on cash, Disney will be flush with cash and I think they'll work something out.

I can't imagine Comcast will look at Spider-Man Homecoming and look at Fant4stic, and see comments from people like us and think it's a good idea to make a Fantastic Four film on their own.

The details are still up in the air, but I feel reasonably confident that Marvel will have creative control of the next FF film made.

 

[Willie Lumpkin]

Richard Greenfield has said that splitting the assets would be a “anti-trust nightmare.”

I don't understand why that would be the case. Shouldn't it be better?

Greenfield just doesn't have any imagination. There are plenty of ways to do it without violating anti-trust principles.

Just as one example, let's imagine Disney drops out and Comcast gets the whole thing. Disney could then say to Comcast: "Hey, when this closes, we'll give you $XXX for Star Wars, Avatar, X-Men and FF." Comcast says: "Sure, we could use that cash. Deal."

They've split the assets, and What anti-trust laws have been broken?

And that's just one simple example. With the billions of dollars on the line, smart lawyers will be able to tackle those problems easily. It would be a little tricky and require some maneuvering, but that's why you pay the lawyers. If it was simple, lawyers wouldn't need to get involved.

 

[Orba]

Looming Fox Bidding War Has Comcast Debt Investors Seeing Red

Comcast’s $65 billion cash offer, along with another for a stake in the U.K. pay TV provider Sky Plc, could very well push the cable-TV provider’s debt load to $170 billion, according to Moody’s Investors Service. Both Moody’s and its bigger rival, S&P Global Ratings, say that might prompt them to drop Comcast’s rating to the lowest tier of investment grade, which would result in a painful increase in its borrowing costs.

And the prospect that Disney will raise the $52.4 billion bid that it already has on the Fox assets, forcing Comcast to boost its offer and borrow even more, is keeping investors on edge. The company’s bonds have been dropping as they weigh the cost of Comcast’s expansion plans.

...

When Comcast first expressed interest in acquiring Fox’s assets, S&P forecast a downgrade of one or two notches, which would put the A- rated company as close to two levels from junk. Comcast’s ratings have been on negative watch from S&P since February following its initial $41 billion bid for Sky.

“Clearly, if things get out of hand, it could be more than that,” S&P analyst Naveen Sarma said in an interview Thursday, referring to a potential bidding war between Disney and Fox.

...

That idea has been floated by Moody’s analyst Neil Begley, who said in a report Thursday that achieving leverage targets consistent with Comcast’s current rating would be “challenging” without some asset sales or a dividend cut. Comcast had about $66 billion of debt outstanding as of March 31. If it were to boost its debt load to the $170 billion that Begley is estimating, it would become the largest non-financial borrower after AT&T.

“No one’s forcing them to buy back stock or suspend their dividend,” Begley, who rates Comcast A3, also four steps above speculative-grade, with a negative outlook, said in an interview. “All of these are different measurements of a commitment to a rating and a level of credibility.”

Assuming that Comcast doesn’t sell any major assets, maintains its dividend and share repurchases, it will take three to four years to deleverage back to current levels, Begley said.

“There’s a good chance for one-notch downgrade, and we left the door open for two notches,” Begley said, referring to Comcast’s current Fox offer.

 

[MasterCat]

Greenfield just doesn't have any imagination. There are plenty of ways to do it without violating anti-trust principles.

Just as one example, let's imagine Disney drops out and Comcast gets the whole thing. Disney could then say to Comcast: "Hey, when this closes, we'll give you $XXX for Star Wars, Avatar, X-Men and FF." Comcast says: "Sure, we could use that cash. Deal."

Disney would be completely insane to pay real money for FF film rights. They got Daredevil and Ghost Rider back for free (?) after two failed films each, and there's no guarantee that a Marvel Studios version would gross more than $519 million, like Ant-Man.

 

[WeaponXCII]

Just having a bigger market cap doesn’t necessarily mean you have the bigger borrowing capability. There are a lot of other factors ( just like the value of your house doesn’t dictate mortgage size and terms - if you’re unemployed, you’re going to have trouble getting a $480,000 mortgage on a $500,000 house). With that said, not only can Disney probably borrow more, but they should be borrowing far less anyway because their offer will likely remain primarily stock.

Why not go to all they can spend now? Because they want to spend as little as possible and Fox may not be worth more than $70 billion. Disney is only going to spend, at most, what they think it’s worth.

If Disney goes to $100 billion, and Comcast never intended to bid more than $70 billion, Disney just threw away $30 billion.

Bit of an oversimplification. Like I said, corporate structures, etc., can get very complicated. Having a big market cap does not always directly translate into buying power. For example, look at how many analyst are worried about how much debt Comcast would accumulate if they go insane and spend $100+ Billion getting Fox and Sky. the same holds true for AT&T who just closed the deal on Time Warner. It comes back to how well a business can leverage the assets they built up so much debt to make their money back and pay down that debt. The company's overall solvency will usually determine how much they can borrow.

Look at how well Disney has leveraged Pixar and Marvel (LucasFilm to a lesser extent). That is the kind of outcome investors hope to see, whereby the cost of acquisition is not only covered, but profits continue to roll in. Marvel has pulled in or around ~$10 Billion in ticket sales for example, on an acquisition of ~$4 Billion. Granted they didn't get every penny of that $10B, but from that we can extrapolate that they probably made a very healthy profit for merchandise and other licensing revenue. Boils down to basically this: the Marvel acquisition has essentially paid for itself and is now printing money for Disney.

Yep, and Comcast could very well be trying to get Disney to put itself into a situation where they get saddled by debt and cannot take part in any future opportunities that may arise from more media consolidation.

Thanks for the clarification, guys- the analogies really help! And I had a feeling that would be the answer for my second question.

 

[Detective Conan]

Disney would be completely insane to pay real money for FF film rights. They got Daredevil and Ghost Rider back for free (?) after two failed films each, and there's no guarantee that a Marvel Studios version would gross more than $519 million, like Ant-Man.

Marvel/Disney was willing to pay millions for the Spider-Man film rights before the deal with Sony was ever a thing. Granted, Spidey is on a different level of popularity than either FF & X-Men but the Fox Marvel Rights(especially the X-Men) could add so much to the Marvel universe. An MCU X-Men with the Disney merchandise engine behind it could be UNSTOPPABLE and rake monster profits IMO.

 

[Iceman]

Might not matter if they spend $100 billion on Fox and have nothing left.

Yes, while the prospect of a bidding war has helped Sky stock, Comcast and Fox paying too much for Fox will mean there is less funding and enthusiasm left to go for Sky full force.

 

[Iceman]

As expected. Next I expect Sky will show preference to Comcast's offer.

Meanwhile, at least articles are getting more interesting:

Even if Comcast Snags Fox, Disney Could Still Snatch Up the X-Men for the MCU


Disney & Comcast May End Up Splitting Fox's Assets

I think some kind of split is the most likely and best solution for all parties.

 

[Willie Lumpkin]

Disney would be completely insane to pay real money for FF film rights. They got Daredevil and Ghost Rider back for free (?) after two failed films each, and there's no guarantee that a Marvel Studios version would gross more than $519 million, like Ant-Man.

Disney hasn’t gotten Spider-man, Hulk, Namor, X-Men and Fantastic Four back for free and if they want them, they’ll have to pay.

If they don’t pay, Comcast can release 3 ‘Marvel’ films every year and that will draw audiences away from Marvel’s own films. The characters Fox controls have value. Not just in box office revenue, but big potential merchandising, tie-ins with theme parks, comic book sales, etc. etc. etc.

Marvel has shown how well it works when they introduce new characters, keep things fresh and flesh out the MCU, and the characters Fox controls would allow them to continue to build.

Marvel would have to be foolish to not recognize the value of the Fox controlled characters, and Marvel isn’t foolish.

 

[Detective Conan]

Disney hasn’t gotten Spider-man, Hulk, Namor, X-Men and Fantastic Four back for free and if they want them, they’ll have to pay.

If they don’t pay, Comcast can release 3 ‘Marvel’ films every year and that will draw audiences away from Marvel’s own films. The characters Fox controls have value. Not just in box office revenue, but big potential merchandising, tie-ins with theme parks, comic book sales, etc. etc. etc.

Marvel has shown how well it works when they introduce new characters, keep things fresh and flesh out the MCU, and the characters Fox controls would allow them to continue to build.

Marvel would have to be foolish to not recognize the value of the Fox controlled characters, and Marvel isn’t foolish.

I agree with you for the most part but allow me to play Devil’s advocate for a bit: Marvel doesn’t technically ‘need’ those rights as they’ve been doing just fine without them. Marvel/Disney just released two billion dollar making movies within the same year and even without the Mutants and First Family they still have access to a voluminous amount of characters with tons of untapped potential.

Don’t get me wrong Willie, Marvel recognizes the value of those characters but they also recognize that have access to characters that can match or even exceed the value of those characters they don’t have access to. Case in point: Black Panther alone made more money than any of the Fox Marvel movies. Black Panther and Iron Man are more popular on film than the X-Men & Fantastic Four are now.

 

[Willie Lumpkin]

I agree with you for the most part but allow me to play Devil’s advocate for a bit: Marvel doesn’t technically ‘need’ those rights as they’ve been doing just fine without them. Marvel/Disney just released two billion dollar making movies within the same year and even without the Mutants and First Family they still have access to a voluminous amount of characters with tons of untapped potential.

Don’t get me wrong Willie, Marvel recognizes the value of those characters but they also recognize that have access to characters that can match or even exceed the value of those characters they don’t have access to. Case in point: Black Panther alone made more money than any of the Fox Marvel movies. Black Panther and Iron Man are more popular on film than the X-Men & Fantastic Four are now.

Sure, and I don't need a Ducati Panigale V4 Speciale, but I'd like to have one, and I'd pay a reasonable price to get one.

If I think I have a chance to get a Ducati Panigale V4 Speciale for, say, $20,000 I'm going to go after it and try to make that happen.

I'm not going to sit back and wait for someone to give it to me for free.

 

[Zarex]

Sure, and I don't need a Ducati Panigale V4 Speciale, but I'd like to have one, and I'd pay a reasonable price to get one.

If I think I have a chance to get a Ducati Panigale V4 Speciale for, say, $20,000 I'm going to go after it and try to make that happen.

I'm not going to sit back and wait for someone to give it to me for free.

After announcing to the Marvel fans that the most successful film franchise of all time was adding a fu**ton of popular characters, it's going to be EXTREMELY challenging to squeeze it back into the tube. As we've seen recently with Star Wars, these mega-franchises ain't invincible. Bad news on the Fox acquisition could have a negative impact on the MCU BO going forward, and Kabletown may (unlike Fox) invest the money required to create a serious competing franchise with their Marvel rights. Iger needs to shut it down now while he still can.

 

[Big Bang]

After announcing to the Marvel fans that the most successful film franchise of all time was adding a fu**ton of popular characters, it's going to be EXTREMELY challenging to squeeze it back into the tube. As we've seen recently with Star Wars, these mega-franchises ain't invincible. Bad news on the Fox acquisition could have a negative impact on the MCU BO going forward, and Kabletown may (unlike Fox) invest the money required to create a serious competing franchise with their Marvel rights. Iger needs to shut it down now while he still can.

Agreed. By directly referencing that and creating expectations, Iger has inadvertently created potential for failure for the MCU. If the deal falls apart, it will put a ton of pressure on Kevin Feige, and that is unfortunate since he didn't create the situation.

 

[Dark Raven]

After announcing to the Marvel fans that the most successful film franchise of all time was adding a fu**ton of popular characters, it's going to be EXTREMELY challenging to squeeze it back into the tube. As we've seen recently with Star Wars, these mega-franchises ain't invincible. Bad news on the Fox acquisition could have a negative impact on the MCU BO going forward, and Kabletown may (unlike Fox) invest the money required to create a serious competing franchise with their Marvel rights. Iger needs to shut it down now while he still can.

Why didn't you just say Futon?

Here's a picture of one now.

 

[Detective Conan]

I do think, if possible, at the very least, Comcast would possibly be open to selling back the FF rights. The FF film franchise has never set the world on fire box office wise and frankly I’m not even sure if Comcast would be quite as enthused about the property when they already have much bigger Marvel properties like X-Men & Deadpool at their disposal. Problem is, I still don’t see Disney bowing down to Comcast’s terms(if they lose Fox to them) because I think Disney would still remember the embarrassment of being out-bidded by them, and that would leave them very sour on doing any business with Comcast for those rights. I really don’t see a world where the Mouse(especially if they’re defeated in a bidding war for Fox by Comcast) being open to paying money for the Marvel rights they own. Me thinks that Iger would take being defeated by his arch-rival(Brian Roberts) very personally and be bitter about ever paying anything to him in exchange for the Marvel rights. I could be wrong, but something tells me I’m not.