No one’s about to feel sorry for Brian Roberts, the media mogul who controls Comcast – and, therefore, also NBC, Universal Studios, and an insanely long list of other properties. Still, you can see why he’s feeling a bit sorry for himself. In a good capitalist system, the highest bidder should always win, and here’s Roberts, losing out on 21st Century Fox despite offering a good $10 billion more than the winning bidder, Disney.
What’s clear is that Rupert Murdoch, who controls 21st Century Fox, wants to sell to Disney and does not want to sell to Comcast. What’s less clear is why he wants to take the lower bid.
Normally, when you sell, you take the highest bid, no matter what your heart says. After all, if you sell below what other people are willing to pay, then you’re running a very high risk that the buyer will be unable to resist the opportunity to flip your property for a quick profit.
In this case, of course, there’s no way that Bob Iger, the Disney CEO, would turn around and sell his $52 billion brand-new acquisition to Comcast. Iger is a master of acquisitions, having hit home runs with Pixar, Marvel, and Lucasfilm; he’s not in this one for a quick 20% profit.
But still, $10 billion is real money, and 21st Century Fox is a public company, and doesn’t Murdoch have a fiduciary responsibility to take that extra $10 billion and give it to his shareholders?
There are two answers to that question: the official answer, and the real answer.
The official answer is that Disney-Fox is a “horizontal” merger, while Comcast-Fox would be a “vertical” merger, and well-paid readers of antitrust tea leaves consider the former to be easier to do than the latter. The increased chances of the government vetoing a Comcast deal mean that it makes sense for Murdoch to just go with Disney instead.
This official story is not particularly convincing. Think about it this way: either the Comcast deal happens, or it doesn’t. If it happens, Fox’s shareholders end up $10 billion richer than if they’d sold to Disney. If it doesn’t happen, they receive a massive fee from Comcast (Murdoch can definitely insist on a multi-billion-dollar payment in the event the deal doesn’t go through), and then they can still always turn around and sell to Disney, which isn’t going anywhere. Selling to Disney and getting billions of Comcast dollars as a cherry on top is clearly a better outcome than just selling to Disney and not getting anything from Comcast at all.
So, what’s the real reason Murdoch wants to sell to Disney? I’ll give you a hint: Murdoch doesn't give two hoots about his shareholders. They’re a necessary evil, a funding mechanism which allowed him to scale up to his current levels of moguldom. If they lose out on a few billion dollars, Murdoch will lose no sleep at all.
Meanwhile, Murdoch doesn’t much care about his own bank account, either. He has vastly more money than he’ll ever be able to spend, he has zero philanthropic ambitions, and he knows that however much money he accumulates before he dies, it’s all going to end up in the hands of a large collection of descendants, all of whom he’s had fraught relations with over the years. His kids and grandkids are already dynastically wealthy: that’s a given, whatever happens to Fox.
Murdoch does, on the other hand, care about two things: His status as a powerful media mogul, and seeing 21st Century Fox flourish in, well, the 21st Century. Murdoch built this company, and he wants it to become bigger and better, rather than disappearing into some cable operator, never to be seen again.
Once the Disney deal closes, Murdoch will be Disney’s largest individual shareholder and will have a direct line to Iger; he might even have a son, James, in a senior position at Disney. The combined Disney-Fox will include a huge amount of Murdoch DNA, especially when it comes to television production, and Murdoch will be justified in taking the occasional victory lap if and when Disney goes on to ever greater strengths.
That’s something money can’t buy. Murdoch could, were he so inclined, take some of Comcast billions and use them to purchase a large stake in Disney. But that wouldn’t be the same. It wouldn’t feel like it was his company. Fox would be elsewhere, buried inside Comcast, part of some bloodless #brand #strategy.
Murdoch’s motivations here aren’t hard to discern, and I’m sure that Roberts, for one, can see them quite clearly. That’s why Roberts is firing up his lawyers: While Murdoch’s actions make perfect sense on a personal level, they’re also hard to justify under Delaware law. If Murdoch’s lawyers can’t put together a compelling financial case why Disney’s offer is superior to Comcast’s, then Comcast might well come back to the arena, possibly with a group of Fox shareholders willing to throw vocal support behind its bid. It’s a long shot, but it’s worth a try. Brian Roberts, after all, didn’t become a media mogul by giving up at the first sign of defeat.