Now that 21st Century Fox Inc shareholders have signed off on the US$71.3 billion sale of its entertainment assets to Walt Disney Co, some investors are already fretting about the next hurdle: regulatory clearance from China.
The deal, although already given a green light by the US Department of Justice, still needs antitrust approval from 15 other regulators around the globe.
That includes China’s State Administration for Market Regulation, because a small proportion — less than 2 percent — of Fox’s revenue is generated in that country.
Some investors are concerned that China might use this deal to retaliate against as much as US$500 billion in import tariffs proposed by US President Donald Trump, who called Fox co-chairman Rupert Murdoch to congratulate him when the transaction was unveiled in December last year.
That is one reason Fox shares are trading as though there is about a 20 percent chance the deal will fail, said people with knowledge of the matter who asked not to be identified because they were not authorized to speak to the media.
“Any deal that needs China’s approval could be used as leverage and a strategic tool in a trade war,” Bloomberg Intelligence legal analyst Jennifer Rie said after the Fox shareholder vote on Friday.
Both companies’ investors gave their blessings to the transaction in separate votes at the New York Hilton Midtown in Manhattan.
It is expected to close in the first half of next year, according to Fox.
Qualcomm Inc’s failure this week to win Chinese approval for its US$44 billion takeover of NXP Semiconductors NV increases the risks for any other US companies involved in deals requiring China’s approval, Rie said.
However, “I would be surprised if regulators in China tried to do to the same thing to Disney/Fox,” she said. “Unlike the Qualcomm case, it’s not credible that there are competition concerns that prevent China’s approval. Using antitrust as an excuse would look like a straw man.”
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