Comcast may be waving the white flag in the bidding war for Fox. CNBC reports that Comcast is unlikely to increase its previous $65B bid to try and top Disney’s current $71.3B bid for most of 21st Century Fox. Disney, already a heavy favorite to acquire Fox, can now work on finalizing the deal with little or no opposition.

Comcast will instead focus on acquiring the majority of British pay-TV provider Sky. Fox already owns 39% of Sky and will sell that share to Disney. Fox is hoping to acquire the remaining 61% of Sky that they do not own, which Fox would also sell to Disney. Comcast, however, currently has the higher bid for that remaining 61%.

Fox can only go so much higher in the bidding for the rest of Sky without Disney approval since Disney would be on the hook to buy that additional 61% share from Fox. It is possible Disney (via Fox) might just let that 61% go to Comcast and walk away with the 39% share Fox already owns, as well as several other assets, including Fox’s movie studio.

Comcast’s uphill battle to outbid Disney for Fox got even tougher over the past few weeks. Disney received approval from the Justice Department to buy Fox, signaling a clear regulatory path. Meanwhile, the Justice Department has appealed the approval of the AT&T-Time Warner merger.

Comcast was emboldened by that approval to make their $65B bid, believing it was enough to overcome Fox’s concerns that a deal with Comcast would inevitably be challenged and potentially blocked by the government. The Justice Department may not win their appeal, but the damage is done as far as Comcast is concerned.

The appeal process could take several months (or even longer). It’s not going to stop AT&T and Time Warner from continuing their merger right now, but the appeal is enough to show that the regulatory path for a deal between Comcast and Fox is not as clear as Comcast wants to believe.

Disney has the higher bid and the approval of the Justice Department already in their back pocket. Disney has a bid that, pending shareholder approval, is guaranteed to close. Comcast doesn’t.

Disney and Fox shareholders are scheduled to vote on the $71.3B deal on July 27.

SOURCE: CNBC