Fox rocked the sports world Friday by removing itself from the auction of Disney’s 22 regional sports TV networks, including the group’s “crown jewel” YES Network.
The sale of the RSNs — a regulatory condition of Disney’s $71 billion deal to take over Fox’s entertainment assets — was slated to enter its second round by the end of this month and conclude in February.
Observers thought Fox would surely backstop the auction, if only by lobbying an 11th-hour bid should final offers fall embarrassingly short of the $20 billion Disney hopes to receive from a sale.
But in a regulatory filing, Fox said “it does not intend to bid for any of the [RSNs].”
“It’s really perplexing,” said a source following the auction managed by Allen & Co. and JPMorgan.
“This could reduce the price to a five-handle,” another source added, referring to an
Ebitda multiple between five and six. Based on the RSNs’ 2017 Ebitda of $1.85 billion, that would put the price between $9.25 billion and $11.1 billion — about half of Disney’s target.
Fox said its surprising statement was timed to help credit-rating agencies assess its ability to take on debt to fund an $8.5 billion dividend to Disney.
Fox’s exit leaves Sinclair Broadcasting the only strategic player interested in buying the RSNs in one fell swoop, even though sources said it submitted a low-ball offer.
“There’s a price to everything,” BTIG analyst Brandon Ross told The Post. “And if it gets low enough, you’ll likely see private equity firms step up and take the risk of RSN ownership.”
As part of the asset sale, Fox agreed on the dividend payment to cover tax liabilities associated with Disney’s completing the transaction.
But people close to the process said the statement’s overriding purpose is to establish “New Fox” as a growth company.
Buying the RSNs, which would have the same effect as keeping them, “would make New Fox look too much like the old Fox,” said one source, who called Fox CFO John Nallen the driver of the decision to exit RSNs.
FBN analyst Robert Routh agreed, noting that RSNs have been losing subscribers in recent years — a trend he attributed to cord-cutting and a new generation that’s “more interested in playing video games and watching YouTube than following sports.”
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