Contrary to the opinions of some financial analysts, one antitrust expert sees Comcasts planned all-cash offer for 21st Century Fox as less of a risk than Disneys pending offer in terms of potential regulatory interference.
Geoffrey Manne, executive director of the International Center for Law and Economics, a nonprofit, nonpartisan research center based in Portland, Ore., notes in a new report (read it HERE) that Comcasts deal would be a “vertical” merger, combining distribution and content assets. Disneys, on the other hand, would be a horizontal one, blending content together. Plus, in terms of movie studio market share, Universal joining Fox would create a smaller new entity than Disney plus Fox.
“On its face, and consistent with the last quarter century of merger enforcement by the DOJ and FTC, the Comcast acquisition would be less likely to trigger antitrust scrutiny, and the Disney acquisition raises more straightforward antitrust issues,” Manne wrote. “This is true even in light of the fact that the DOJ decided to challenge the AT&T-Time Warner merger. The AT&T/TWX merger is a single data point in a long history of successful vertical mergers
that attracted little scrutiny, and no litigation, by antitrust enforcers (although several have been approved subject to consent orders).”
Comcast sent a loud, clear signal yesterday that it is in the “advanced stages” of making an all-cash offer for Fox. Although it didnt specify a price, word emerged earlier this month that the NBCUniversal parent was seeking financing for an offer in the range of $60 billion — well north of Disneys pending $52.4 billion, all-stock deal.
Manne, who is also a distinguished fellow at Northwestern Law School and an appointee of FCC Chairman Ajit Pai to the commissions Broadband Deployment Advisory Committee, said even a verdict against AT&T wouldnt change his view. If U.S. District Court Judge Richard J. Leon were to rule in favor of the government, it would mean “that the courts are becoming hostile to vertical mergers any more than the DOJs challenge means that vertical mergers
suddenly entail heightened enforcement risk,” he wrote. “Rather, it would simply mean that that, given the specific facts of the case, the DOJ was able to make out its prima facie case, and that the defendants were unable to rebut it.”
Some areas of Disneys business could prove problematic to regulators, Manne argues. Adding Foxs regional sports networks to ESPNs muscle is a “relatively larger complication” than combining them with Comcast, he said. Also, he notes, “Disney is the worlds largest licensor, earning almost $57 billion in 2016 from licensing properties like Star Wars and Marvel. Universal is in a distant 7th place, with 2016 licensing revenue of about $6 billion.”