Amazon Bids For Disney’s 22 Regional Sports Networks: CNBC

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Amazon Bids For Disney’s 22 Regional Sports Networks: CNBC
By mydisneyadventures (Flickr: Cinderella) [CC BY 2.0], via Wikimedia Commons

Following is breaking news from CNBC’s David Faber on CNBC’s “Squawk on the Street.”  Following is a link to Faber’s breaking news on-air, as well as a link to his story on CNBC.com.

Faber Report: Amazon bids for Disney’s 22 Regional Sports Networks

David faber: A quick diversion to merger and acquisition land if you will allow me a few minutes here. The story that I have been following that I have not reported lately until this moment and it is interesting. I am talking about the sale of the regional sports networks by Disney remember this of course a key point in the deal to acquire fox were they agreed with the DoJ to immediate sell and not even spin off but they must be sold these 22 regional sports networks that Disney is buying from fox a deal that’s given the Chinese approval that we got yesterday it could close certainly in the first quarter many believe. The time is coming they’ll have time after that to actually close this transaction but they’re moving ahead in fact, I can tell you first round bids, first round bids were received and here is what we got why is amazon at the bottom of that you may ask well that’s what I am going to get to in a moment because it is somewhat interesting. In the first round, I am told by people familiar of the situation. The bankers who are selling this JPMorgan and Allen & Company both said no club deals. In other words you can’t partner yet give us a range of where you think you may come in, you are going to do it separately. So Apollo and KKR and Blackstone, no surprise all participating large private equity firms. As well as some smaller broadcasters Tegna and Sinclair but again, they’re in there with the idea that eventually you are going partner. The biggest partner of all of course would be fox which did not submit a bid in the first round. We’ll get back to that in a second the most interesting potential bidder here is amazon. Amazon has bid I am told again by people who are familiar with the situation for all 22 regional sports network. And intererstingly it is also participating and this is allowed by the bankers who are running this in a club deal for the yes network. Remember yes is the single largest rsn out there. It is the Yankees. And it is 20% owned by the Yankees by the Steinbrenner family. The Yankees, they have the opportunity to buy 80% if there is a change of control they are taking that I am told amazon along with Blackstone and a Sovereign Wealth Fund are a part of a group that’s joined in the Yankees in making a bid to acquire that out of this family of RSNS as is their right. So it is interesting isn’t it amazon is deciding to bid a significant option for sports network. What’s the plan? Keeping them on cable and collect a fee? If you are out there as a high paying cable customer who does not want these things. The cable company now says now you can get it on prime so we don’t need to offer it any longer we can cut price we can eliminate it from the bundle interesting choice on amazon’s part perhaps they see opportunities perhaps there are opportunities for them of the sales of tickets, sale of memorabilia or programming or advertising where we know they become an important player certainly when it comes to search on the actual amazon platform but many of the merchants need to do that as well so very interesting to note. Back to fox before I wrap this up just because they have not participated so far does not mean that fox which owns these and runs them and knows them better than anybody is not going to ultimately participate. They can end up partnering with a private equity firm though the governance provisions there could conceivingly difficult to sort of figure out or they can choose to participate on their own in the second round of bidding. Don’t count fox out. Though do keep in mind were they to pursue it would severely limit their ability to do anything else given where it would take leverage at fox. John Malone who I interviewed last week certainly thinks Fox continues to be the best buyer.

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Sound from liberty media chairman John Malone interview with David Faber which aired November 14, 2018

John Malone: the best buyer is somebody who has other market power, right?

Faber: potentially fox

Malone: potentially fox where they are now

Faber: right

Malone: where they have been grown and nurture because nobody wants to live without the fox network and fox news oh by the way, you got to take regional sports, you know, it is a bundle

Faber: yep

Malone: I think Laughlin is the best buyer it would be embarrassing for Disney to pay 15 and turn around and sell it at 8 but I think that’s reality

Faber: due diligence will commence next week. You are not going to get the second round until the middle, let’s call it, of December, it looks like but amazon’s participation by the way haven’t heard back from amazon yet, no comment from them. It is very interesting.

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Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver

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