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Disney Loses Suitor For Sports Networks -- WSJ

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01/12/2019 | 02:48am EST

By Joe Flint and Miriam Gottfried

Walt Disney Co. lost a potential suitor for the 22 regional sports networks it is selling as part of its purchase of the majority of 21st Century Fox Inc. media assets, which could complicate an already complex sale process.

Fox Corp., the company that will remain after the Disney deal closes, won't make a bid to reacquire the sports networks, according to a 21st Century Fox regulatory filing Friday. Disney, the parent of sports-TV juggernaut ESPN, is required by the Justice Department to sell the regional channels in return for approval of the 21st Century Fox acquisition.

Given that Fox Corp.'s leadership has often said live sports would play a large part in the new entity, industry analysts anticipated the company would eventually make a play for the networks.

Inside Fox, though, there was a growing sentiment that regional sports networks -- a once-powerful business -- will face many challenges in the era of cord-cutting and streaming services, an executive at the company said.

The official withdrawal of Fox from the sales process could actually encourage other potential buyers to become more aggressive, some people familiar with the matter said.

Disney has up to six months from the close of the 21st Century Fox deal -- which has yet to happen -- to unload the regional sports networks. Final bids are expected by the end of the month, a person close to the process said.

Guggenheim Securities valued the regional networks at $25 billion, but some potential bidders and industry observers say these regional channels are more likely to fetch between $16 billion and $20 billion, depending on how they are packaged and sold.

Among the channels being sold is the Yankee Entertainment and Sports Network LLC, the New York City outlet that primarily carries Yankee baseball and is considered the most valuable of the properties. The Yankees own 20% of YES and have rights to acquire the remaining 80%. Disney is seeking a valuation of between $5 billion and $6 billion for YES, people familiar with the matter said.

The Yankees have held talks with Sinclair Broadcast Group and Amazon.com Inc. about partnering on a bid for the channel, people close to the situation said.

Sinclair is interested in buying the other 21 networks, a person with knowledge of the company's thinking said. Sinclair is also in talks to partner with the Chicago Cubs on a sports channel there.

Private-equity firms have also expressed interest in the networks. Blackstone Group LP has been discussing a potential bid with Sinclair, and Apollo Global Management LLC has reached out to Bob Bowman, who formerly ran Major League Baseball's digital-media business, for advice on the industry, according to people familiar with the matter. Mr. Bowman led MLB Advanced Media for 17 years, building it into a powerhouse digital platform, before being forced out in 2017 for inappropriate workplace behavior, The Wall Street Journal reported.

Major League Baseball is interested in the channels as well, the organization's Commissioner Rob Manfred said.

The removal of Fox makes it more likely that there won't be a single buyer for all the networks.

"It does increase the possibility that these will be sold off piecemeal, " said one consultant working with a suitor.

Write to Joe Flint at joe.flint@wsj.com and Miriam Gottfried at Miriam.Gottfried@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
SINCLAIR BROADCAST GROUP INC 1.11% 30 Delayed Quote.12.64%
TWENTY-FIRST CENTURY FOX -0.14% 48.6 Delayed Quote.1.14%
WALT DISNEY COMPANY (THE) -0.59% 111.76 Delayed Quote.2.53%
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Financials ($)
Sales 2019 60 336 M
EBIT 2019 14 890 M
Net income 2019 10 704 M
Debt 2019 20 310 M
Yield 2019 1,59%
P/E ratio 2019 15,85
P/E ratio 2020 15,18
EV / Sales 2019 3,11x
EV / Sales 2020 2,76x
Capitalization 168 B
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Number of Analysts 26
Average target price 124 $
Spread / Average Target 11%
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Robert A. Iger Chairman & Chief Executive Officer
Christine M. McCarthy Chief Financial Officer & Senior Executive VP
John S. Chen Independent Director
Aylwin B. Lewis Independent Director
Fred H. Langhammer Independent Director
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