What happened

After a federal judge ruled in favor of AT&T's proposed acquisition of Time Warner, shares of Twenty-First Century Fox (NASDAQ:FOXA) (NASDAQ:FOX) were up 7.5% today. In particular, investors seem to be betting that the judge's decision not only improves the chances of success for Disney's (NYSE:DIS) proposed $52 billion acquisition of most the assets of Fox, but also paves the way for Comcast (NASDAQ:CMCSA) to step in with its own rival bid.

Woman drawing a yellow image of a large fish eating a smaller fish


So what

Recall that the U.S. Department of Justice sued AT&T this past November in an attempt to block the deal, arguing it would harm competitors while reducing choices and increasing prices for consumers. Late yesterday, however, U.S. District Judge Richard Leon decided otherwise, issuing his decision with no conditions for the merger's approval.

Meanwhile, speculation has swirled that many companies have held off on mergers and acquisitions until they could learn the results of the trial -- though that didn't stop Comcast from recently revealing its own efforts to put together a $60 billion all-cash offer for Fox, rivaling Disney's $52 billion cash-and-stock agreement.

Now what

Even so, that doesn't guarantee that Fox will break its pact with Disney. In fact, according to Disney's filings with the Securities and Exchange Commission regarding the deal, Fox already opted not to pursue a previous offer from Comcast. This was due to a combination of:

  • potential regulatory hurdles (given Comcast's previous failed attempt to acquire Time Warner);
  • Comcast's refusal to pay Fox a reverse break-up fee (at the time) if the offer fell through;
  • Fox's "better strategic fit" with Disney; and
  • the "relative attractiveness of the resulting equity currency in a combined Disney-21CF."

Of course, it remains to be seen whether Fox will change course with a sweetened cash offer from Comcast. But with shares of Disney up 2% today as well, it seems the market likes the chances for the House of Mouse to prevail.