Failing to Acquire Fox Assets Could Cost Disney



Disney and Fox expect a quick conclusion of regulatory reviews

Walt Disney (DIS) and Twenty-First Century Fox (FOX)(FOXA) exude confidence that their $52.4 billion asset transaction deal will sail through regulatory reviews without much delay or need for significant concessions. Meanwhile, AT&T (T) and Time Warner (TWX), which are seeking to combine in a deal valued at $85.4 billion, have taken longer than originally expected to complete their deal.

It’s not that Disney and Fox don’t expect significant regulatory scrutiny of their deal, but they hope that regulatory reviews would conclude quickly so that they can close the deal in the next 12 to 18 months. According to Rupert Murdoch, the executive chairman of Fox, they carefully considered potential regulatory challenges before settling on a deal with Disney rather than Verizon (VZ) or Comcast (CMCSA), which are said to have also shown interest in acquiring Fox’s assets.

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Failing to close the deal could cost Disney $2.5 billion

In their agreement, Disney and Fox included a provision for breakup fees. They also set conditions that would trigger the payments. Disney would owe Fox $2.5 billion in breakup fees if the deal failed because US (SPY) federal regulators blocked it, potentially driving up expenses. Fox would owe Disney a little over $1.5 billion if it pulls out of the deal.

AT&T committed $500 million in breakup fees

AT&T agreed to pay Time Warner $500 million in breakup fees if regulators block their merger agreement. Time Warner would owe AT&T $1.7 billion if it decided to pull out of the deal. AT&T surrendered $4.0 billion to T-Mobile (TMUS) in breakup fees when it failed to acquire the junior rival in 2014.


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