Within hours after Apple Inc. and Comcast Corporation announced their long-anticipated merger agreement late last night, Facebook, Inc. said it would make a hostile bid for Comcast. The Apple-Comcast deal, a stock-for-stock transaction valuing Comcast at $150 billion, is nominally billed as a “merger of equals” but few doubt that Apple, with a market cap nearing $500 billion, is the true acquirer.
Comcast has two classes of stock, all of the Class A being publicly held while all of the Class B, which has super-voting rights, held by the Roberts family, giving them thirty percent of the company’s total voting power. A Comcast executive, who said the deal had been in the works for years as part of its strategic plan, called the transaction “a marriage made in heaven that could not be torn asunder.”
Facebook believes otherwise. The upstart social media business, with a market cap of $170 billion, says the late-night announcement merely put Comcast “up for sale.” Facebook officials said that Comcast’s board must entertain its bid. Offering a combination of cash and stock that it says values Comcast at $190 billion, Facebook portrays its bid as “clearly superior.”
Comcast officials immediately dismissed Facebook’s overture. “We are a staid Philadelphia-based, family-oriented company with prime assets such as NBC network television and the Golf Channel,” one Comcast executive explained. “Facebook is a motley crew of youthful Menlo Park hoodies. We cannot see the two companies coming together under any circumstances. Apple, in contrast, gets our ‘TV culture’.”
For its part, Apple says its valuation of Comcast is generous and that it is not prepared to engage in competitive bidding. “Facebook cannot be serious in thinking it can win a takeover battle for Comcast against Apple. We are a far superior company and can assure Comcast and its stockholders of closing the transaction unconditionally.”
Analysts also noted that the Apple-Comcast merger agreement includes a termination fee requiring Comcast to pay Apple $1 billion if the transaction fails to close for any reason. In addition, should the transaction note close because the Comcast board determines that its fiduciary duties prevent it from closing, Apple has the option to acquire 19.9 percent of Comcast’s Class A stock at yesterday’s closing market price. The option purchase price may be paid with an Apple promissory note and settled, at Apple’s option, for cash in lieu of shares. There is no cap on its value.
Facebook’s bid is conditional on those two contract terms being withdrawn or declared invalid. Apple and Comcast have scheduled all-day emergency board meetings for April 1.