Rupert Murdoch has been lucky – or, more likely, skilful in his timing. He is now sitting on two juicy offers for the best bits of 21st Century Fox – the all-share $55bn (£41m) proposal from Disney, which was agreed six months ago, and now the thumping $65bn cash offer from Comcast.
To understand quite how far Comcast is pushing out the boat, look at how much debt the owner of NBCUniversal is prepared to shoulder to get the Fox assets. If the separate offer for Sky in the UK were also to succeed, Comcast would have borrowings of roughly $165bn, an astonishing sum even in a US media market driven to panic by the rise of Netflix.
There’s no need to worry, argues Comcast, because the entire combo would have annual revenues of $130bn and top-line profits of $40bn and there’s a plan to reduce financial leverage to vaguely normal levels within four years. The stock market, to put it mildly, is less bullish. Comcast’s shares have fallen by a fifth since the chairman and chief executive Brian Roberts signalled his appetite to trump Disney’s offer. Investors, in other words, think Comcast is at serious risk of over-paying and handing gifts to Fox and the Murdochs.
At other companies, shareholders might rebel, but there’s no prospect of that at Comcast. Roberts controls a third of the votes and, in any case, other investors won’t be asked their opinion because no new stock is being issued. The board is free to write a $65bn cheque if it can find the finance, which is odds-on since the credit rating agency Moody’s, while calling the proposed debt levels “staggering”, also thinks the new paper would be worthy of investment grade.
Murdoch can enjoy the sport. If he still wants to swap into Disney shares, the option remains available, assuming he can keep other Fox shareholders in tow. He can also push Disney to improve its terms. Or he can take Comcast’s pile of cash. On day one last December, the Fox/Disney proposal was widely seen as a meek retreat by Murdoch from media-land’s top table. It would still be a retreat of sorts but, on all the most likely plotlines, the wily old operator can expect to paid spectacularly. He knows when to sell.
Unilever investors, find your voice
Unilever is terribly sorry for disappointed investors, but its attempt to bully the compilers of the FTSE 100 index has failed. It is “extremely unlikely” that Unilever’s shares would be allowed to stay in the index if the group succeeds in collapsing its current dual Anglo-Dutch share structure into a pure Dutch arrangement and establishes its sole headquarters in Rotterdam. This news merely confirms what seemed likely all along. Dutch-domiciled companies with a single class of Dutch shares don’t qualify.
Among the disappointed folk will be managers of funds that track the FTSE 100 and FTSE All-Share indices. They will become forced sellers when Unilever drops out. The fact that the Dove-to-Persil giant will retain a premium listing in London is irrelevant for them. It’s the presence in the indices that matters, and the 2.8% fall in Unilever’s share price on Thursday merely demonstrated that forced sellers don’t get the best prices.
By rights, the managers of those tracker funds should be up in arms on behalf of their investors. After all, Shell, another huge company with Anglo-Dutch heritage, retains its main listing in London and thus has FTSE 100 status. Shell’s structure doesn’t seem to impede deal-making, one of the arguments Unilever has advanced for total “simplification” in the Netherlands.
More to the point, Unilever needs 75% approval from its current plc shareholders to achieve the big switch, which is a high hurdle. To date, only Columbia Threadneedle, an active fund manager, has expressed any principled objections with Unilever’s plan. Other big UK investment houses are said to be unhappy but they need to speak up – soon. Come on, Legal & General Investment Management, flag-bearer for the tracker industry, find your voice. So, too, The Investor Forum, the lobbying collective of big fund managers – this is your territory.
Unwise move, Erdoğan
Turkey’s president, Recep Tayyip Erdoğan, says he plans to conduct an “operation” against Moody’s after elections this month because the rating agency has been making “unnecessary statements despite the fact that we are not a member of it”, reports Bloomberg.
Maybe something was lost, or added, in translation but the “unnecessary statements” line presumably nodded to Moody’s warning this month that Turkish debt is on review for a downgrade. Whatever was meant, Erdoğan’s threats do not sound wise if Turkey wants to continue to tap capital markets. Even if Moody’s could be silenced (how?), investors will form their own opinions. Those views would surely be more negative.
