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Fox shares rise 3 per cent on potential Comcast offer

Shares of Twenty-First Century Fox Inc rose as much as 3.4 per cent on Tuesday after Reuters reported that cable operator Comcast Corp was preparing an all-cash bid to rival a deal agreed late last year with Walt Disney Co.

Comcast, the world’s biggest entertainment company, is asking investment banks to increase a bridge financing facility by as much as $60 billion so it can make an offer for Fox’s media assets, three people familiar with the matter said on Monday.

Disney in December had offered to buy film, television and international businesses from Fox for $52.4 billion in stock to beef up its offering against streaming rivals Netflix Inc and Amazon.com Inc.

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A handful of notes from Wall Street analysts said Comcast’s involvement was likely to push Disney to raise its existing offer.

Disney shares fell 1 per cent in morning trade in New York, while Comcast’s dipped 3.5 per cent to $31.25.

“It is reasonable to expect Disney to counter any potential offer while also changing the composition of its current all-stock offer,” Jefferies analyst Scott Goldman said.

“Comcast and Disney are likely to view this as the last remaining transformational deal in media.”

He also pointed to the huge increase in Comcast’s debt the acquisition of both Fox and British pay-TV group Sky for almost $100 billion in total would generate.

“Investors have considered such a move ever since Comcast inserted itself in the race for control of Sky,” Jefferies’ Goldman said.

“However, investors likely have not contemplated an all-cash bid, which would take pro forma leverage to around 4.5 times, including synergies, intensifying the balance sheet debate.”

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Comcast stepped up its push to buy UK-based Sky on Tuesday, keen to prove that it will face fewer regulatory hurdles in its $31 billion pursuit of Sky compared to Fox.

Fox is in the final stages of a bid to buy the 61 per cent of the UK broadcaster it does not already own but at 10.75 pounds a share compared with Comcast’s 12.50 pounds has so far made the lower offer.

Shares of Fox were last up 2.2 per cent at $38.86.

“Assuming Fox continues to pursue a deal with Disney, Fox will need to raise its bid for Sky from its current level ... in order to win control,” UBS analysts wrote in a note to clients.

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