Comcast had arranged financing with banks in order to make a higher offer than Disney.
Disney, Fox and the DOJ did not immediately respond to requests for comment.
The door remains open for Disney to make another offer in an attempt to match or outbid Comcast.
The financial bidding war comes just a day after U.S. District Judge Richard Leon gave his blessing to AT&T’s acquisition of Time Warner without putting any conditions on the $85.4 billion deal. That approval signaled that Comcast might have less regulatory trouble in buying Fox than previously expected.
The Comcast offer sets up a battle with Disney, which has plans to create a streaming media service to rival Netflix and wants Fox TV shows and movies to lure subscribers. Fox shareholders and media watchers will now wait for Disney to either increase its offer, walk away, or negotiate a split of the assets with Comcast. (Comcast has a separate offer on the table to acquire satellite broadcaster, Sky.)
Whichever company wins the Fox assets will gain majority control of Hulu, which is the third-biggest player in the growing subscription streaming market behind Netflix and Amazon. Right now, Disney and Comcast each own 30 percent of Hulu. Either company could, however, offer to sell their stake in Hulu as part of the deal.
Fox isn’t selling the whole company. The remaining company, which as colloquially been called “New Fox,” will focus on news and sports and include Fox’s broadcast network and domestic cable channels including Fox News and Fox Sports 1 — and will have a war chest to go out and potentially acquire other assets. It could also merge in the future with News Corp. Both companies are controlled by the Murdoch family.
“We are pivoting at a pivotal moment,” said Rupert Murdoch at the time of the Disney deal in December.
Fox’s board is set to meet on June 20 to consider the offers, and a Fox shareholder meeting is scheduled for July 10. Rupert Murdoch, executive chairman of 21st Century Fox, will have to take into consideration all Fox shareholders when deciding which bid to favor.
Murdoch had previously spurned a Comcast offer and reportedly favored Disney’s all-stock bid — but there’s also the question of board seats for him or his sons, James Murdoch and Lachlan Murdoch.
The Murdoch family would own about 4 percent of Disney if that deal went through, but are reportedly not being offered any seats on Disney’s board.
One senior Hollywood executive, who asked not to be named because he is the midst of deals, said the prospect of a Disney board seat could end up being a useful part of a counter-bid.
“[Rupert Murdoch] might like being on the Disney board,” the executive said. “I think [Disney CEO] Bob [Iger] would be very happy having Rupert involved in his company.”
Barton Crockett, a media analyst with investment bank B. Riley FBR, said in an investor note on Wednesday that he expects Disney to increase its offer.
“We would expect Disney to at least match Comcast by adding cash, and Comcast to appease Murdoch’s tax concerns by offering stock, and some back and forth raising the deal bid,” Crockett wrote.
Crockett also noted that the two companies could come to an agreement in which they each get some of the Fox assets.
“Barring a third entrant (Internet/tech is possible), we would see the most sensible outcome as splitting the baby, with Comcast getting Sky (which we see as its main goal) and Disney getting most of the rest,” he wrote.
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