Rupert Murdoch’s Twenty-First Century Fox Inc (NASDAQ:FOXA) has refuted suggestions that it held preliminary discussions to acquire Discovery Communications Inc. (NASDAQ:DISCA). Such a deal, if approved, would result in the creation of a $100 billion sports, movie and entertainment giant.
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According to sources close to the alleged meeting, 21st Century Fox met with their counterparts at Discovery Communications Inc. (NASDAQ:DISCA) about two weeks ago to discuss a potential deal. The source has since said that the discussions were ‘nascent’ and it was in early days to speculate whether a formal offer would be tabled. It is being reported that investment banking advisers were present in the meeting.
A move to acquire Discovery Communications Inc. (NASDAQ:DISCA) comes on the heels of Fox trying in the recent past to shift its attention to on-demand TV. Discovery, which owns Animal Planet and Discovery Channel, would be a great addition to FOX’s broadcasting cable channels. Should the deal go through, it will result in a media powerhouse able to generate more than $38 billion in annual revenue.
Content producers such as Fox have been forced to pursue such deals to compete better against the likes of Google Inc (NASDAQ:GOOGL) and Amazon.com, Inc. (NASDAQ:AMZN) that are increasingly investing on original content. A deal for Discovery Communications will accord Fox with more leverage with program distributor Comcast Corporation (NASDAQ:CMCSA) that is also pushing for a deal with Time Warner Cable Inc (NYSE:TWC).
A takeover of Discovery Communications Inc. (NASDAQ:DISCA), on the other hand, will suggest Mr. Murdoch ending an alleged plan to acquire movie and TV giant Time Warner. Fox was rebuffed last year on its proposed $80 billion takeover of Time Warner. The takeover talks come in the wake of increased concerns that on-demand services offered by the likes of Netflix, Inc. (NASDAQ:NFLX) and Hulu were slowly switching off Linear TV.
The migration has been gradual but continues to be evident on quarterly results of some of the world’s largest media companies that have seen their advertising revenues drop.