With Two Suitors for Fox, the Murdochs Consider Next Steps

Rupert Murdoch, with his wife, Jerry Hall, has agreed to sell much of 21st Century Fox’s assets to the Walt Disney Company. But Comcast has made an offer that complicates the situation.

The Walt Disney Company has agreed to buy most of 21st Century Fox’s assets in a deal worth $52.4 billion, but things got complicated last week when Comcast made a rival offer that valued the business at $65 billion.

At stake are cable channels including FX and National Geographic, the “Avatar” and “X-Men” film franchises, and a pair of international television networks. It may stoke visions of blistering negotiations between high-powered media executives with big egos barking into phones or ruminating in closed-door meetings, but there are rules of engagement around mergers that are designed to civilize the process.

Fox and its chairman, Rupert Murdoch, will have a lot of say over how the process is managed.

How will Mr. Murdoch and his board of directors proceed? Here’s a breakdown of what to expect.

Fox has already accepted Disney’s offer, which means that the two companies are continuing to move forward with that deal. For now, Fox shareholders are scheduled to vote on that agreement on July 10.

At the same time, Mr. Murdoch and the Fox board will be evaluating Comcast’s terms to see if they like them better. That will start with a relatively quick inspection to see if the offer is serious enough and competitive enough to grant Comcast access to its books, known as due diligence.

The Fox board already had a meeting scheduled for Wednesday. Now, Comcast will be the main topic of discussion.

It’s not as simple as saying Comcast’s $65 billion offer is larger than Disney’s $52.4 billion deal.

First, Fox has to decide if Comcast’s financing is good, just as someone selling a home wants to make sure the buyer has secured a mortgage. Also, the currency of both offers is different. Comcast is offering cash, while Disney is paying with its stock, which could carry some tax benefits and rise in value in the long run.

Fox also wants to be confident that any bid would be approved by the government.

The Federal Communications Commission, which regulates broadcasters, isn’t a factor. Disney’s proposal isn’t undergoing F.C.C. review, and Comcast said its offer shouldn’t be subject to F.C.C. approval since there wouldn’t be any transfer of broadcast licenses. The Fox broadcast network, Fox News and the sports network FS1 aren’t being sold.

That leaves the Justice Department, which was dealt a blistering defeat last week in its attempt to block another media merger: AT&T’s purchase of Time Warner.

That outcome could help Comcast, which will be challenged on two fronts: as a content distributor, through its cable and broadband service, and as a content provider, via its NBCUniversal division.

Last week’s ruling allowed AT&T, a distributor, to purchase Time Warner, a news and entertainment colossus that owns HBO, CNN and the Warner Bros. film studio. The decision could conceivably be applied to the Comcast-Fox deal, according to at least one former lawyer for the Justice Department.

When announcing his company’s bid for Fox last week, Brian L. Roberts, Comcast’s chief executive, said he was “highly confident that our proposed transaction 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.”

However, Fox owns 22 regional sports networks, such as the Yankees’ YES channel in the New York area. Comcast’s NBCUniversal group already operates nine regional sports networks, while Disney has control of ESPN, the dominant cable sports channel in the country. The Justice Department could see either of these combinations as potentially stifling competition.

Mr. Murdoch and his board will want to see which side has crafted the better regulatory maneuver. Both Disney and Comcast are willing to divest the regional sports networks should the government require.

Separately, Hulu would come under the control of either Comcast or Fox — both of which currently own portions of the streaming service. The Justice Department could see Comcast as a possible threat here since it is also the largest broadband provider in the country. Disney is just a programmer. But according to two people familiar with the matter who spoke on condition of anonymity to discuss company deliberations, Comcast would also consider selling Fox’s 30 percent ownership of Hulu as a concession.

In other words, it might be a regulatory wash.

If so, then it comes back to which offer is better. Mr. Murdoch is said to have favored Disney’s offer last year, partly because an all-stock transaction would not require an immediate tax payment. Comcast’s bid is all cash and would be taxable right away.

Insiders, however, say the Murdoch family — the elder son, Lachlan, is Fox’s executive chairman, and his brother, James, is chief executive — will advocate for the best offer, regardless of the tax implications. The board, after all, has a duty to its shareholders to maximize their returns. Even a Disney stock deal would ultimately incur a tax hit once an investor cashed in those shares.

Investors with a significant ownership in Fox are already smiling.

“As a Fox shareholder, I’m the happiest guy in the world,” said Mario J. Gabelli, chief executive of the investment firm Gamco Investors. “I have a bidding war for one of my largest holdings. I have over $500 million in this, and I think it’s terrific.”

If the Murdochs and the board determine Comcast has the superior offer, they will alert the Disney chief, Robert A. Iger, and his directors of their new preference, and the July 10 shareholder meeting will be void.

Disney then has five business days to respond. If Disney returns with a counter bid Fox likes, the ball is back in Comcast’s court.

But unlike Disney, Comcast wouldn’t have the luxury of time.

That’s because it has to negotiate within the confines of the merger agreement already laid out between Disney and Fox, which has built in some protections for Disney, specifically what is known as the right of last refusal. In other words, Disney will always have a chance to counter Comcast until it decides it has had enough.

There is still a potential gray area in the process. Before Fox officially notifies either party, it could try to stoke a higher bid by hinting of its intentions. This is where some gamesmanship could come into play.

But whether Disney or Comcast winds up with the assets, it is Mr. Murdoch who will be the real winner.

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