Comcast bullish even after being turned down by Disney

MUMBAI: Even after the Walt Disney Company gave the thumbs down to Comcast's unsolicited bid yesterday, the rejected yet bullish cable giant is betting that time will push Disney's stock price back down to a level that will make its original offer look good.

After hearing that Disney's board had rejected its hostile bid, Comcast sources were putting out the word that it had no intention of increasing the bid on its own. One source which was close to the cable giant was quoted in the BusinessWeek Online saying, "We're not going to be bidding against ourselves. We think we put a pretty fair bid on the table the first time."

In one media report Comcast chairman Brian Roberts made it clear that he's "a disciplined buyer," ready "to walk away from the deal." Another media report said that it was likely that Comcast would increase their bid to something closer to a single share of Comcast for a share of Disney. As for the cash component, they could sell off some assets -- like the Golf Channel or one of the smaller cable systems. And Comcast could hit up money-rich Microsoft, already a seven per cent owner, for some cash in return for added stock that comes with a shareholder agreement preventing the software giant from exercising further control.

Further complicating matters for Roberts, Disney chairman Eisner has his board's support and is showing he intends to keep running his company. Indeed, the day after his board rejected Comcast's bid, Eisner announced the purchase of Kermit the Frog and other characters from Jim Henson Co.

All that could change in the coming weeks, as the 3 March annual meeting draws closer. At that point, by Comcast's reckoning, the difference between the two companies' stock prices will have widened further -- making Comcast's shares even more attractive.

On the other hand, of the most likely candidates to consider competing bids, Viacom has already told investors and analysts that it is not interested, and Time Warner, just coming out of its ill-fated union with America Online, seems unlikely to take on another megamerger.

Some analysts said that Comcast may bid more for the Mouse House, but it would be very disciplined in not offering more than one share of its stock for each share of Disney because any higher offer would leave Comcast with less than 50 per cent of the combined company. Its current offer is for 0.78 share of Comcast for each Disney share.

For now, the outcome of Comcast's overture is uncertain. After all, it is not unusual for the price of a target company's stock to surpass the bid price. Analysts say that Comcast could sit on its offer for as long as several months as it waits for stock prices to stabilise and shareholder support to work in the deal's favor. Of course, Comcast would have to change its strategy if another bidder emerges. But thus far, analysts have been hard-pressed to come up with other possible bidders for Disney.

All said and done, the crux of the matter is that Comcast will have to prove that it can improve Disney's assets and it will have to raise its bid to make the acquisition work.

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