Fox Determines Disney Deal Has Less Regulatory Risk Than Comcast Deal

Disney raising it's offer to 21st Century Fox is a big factor in Fox's recent decision to accept Disney's offer, but it also comes down to other issues with a Comcast deal.

Fox's management team and lawyers at Cleary Gottlieb Steen & Hamilton LLP reviewed Disney's updated offer earlier this month and determined that a deal with the Walt Disney Company has less antitrust risk than a deal with Comcast Corp (via Bloomberg).

"While a potential Disney transaction was likely to receive required regulatory approvals and ultimately be consummated, a strategic transaction with Comcast continued to carry higher regulatory risk," according to a registration statement filed with the U.S. Securities and Exchange Commission. That could lead "to the possibility of significant delay in the receipt of merger consideration as well as the risk of an inability to consummate the transactions."

The Fox board agreed to accept Disney's new deal, which pays out $71.3 billion to purchase the assets from 21st Century Fox. During their review of the deal that acceptance came down to eight factors, one of which was the U.S. Department of Justice's "apparent sensitivity to the potential anti-competitive effects of vertical integration" according to Fox's filing.

Comcast made the sizable bid for the Fox assets after the Department of Justice's case against the AT&T Time Warner merger didn't hold up, but Fox doesn't attribute that to the deal being in the all-clear necessarily. In the filing Fox indicates the Justice Department's case fell apart due to lack of evidence, not as a matter of law.

Fox also considered Comcast's market share and presence in broadband, as well as what a potential deal could do to Comcast's sports networks, which would be competing with Fox's sports division. They also cited that Comcast wasn't offering enhanced protections to take care of the regulatory risk, though they did add that Comcast's offer in that regard was better than their previous one.

"A strategic transaction with Comcast would be subject to a greater degree of regulatory uncertainty, including the possibility of an outright prohibition and a higher risk of divestitures and delay to closing," Fox said. "A transaction with Comcast, given its asset mix, raised a significantly more difficult set of regulatory issues than a transaction with Disney."

Both deals were considered after Disney CEO Bob Iger presented Disney's new offer on June 19. The very next day Fox's board presented the key points of each and took a vote, where Disney won out in the end.