As we await Comcast Corp.’s impending counterbid for 21st Century Fox Inc.’s assets, some of us are still scratching our heads. Comcast had a good thing going—so why rattle shareholders, take on a bunch of debt and embark on a long and uncertain regulatory fight for a deal that, by Comcast’s own admission, it doesn’t need?
The answer may just be because Brian Roberts wants to. On Tuesday, a judge will rule on whether to allow AT&T Inc. to proceed with its takeover of Time Warner Inc., and that may give Roberts the green light to bid for Fox.
The Comcast CEO may not be as recognizable outside the media sphere as Walt Disney Co.’s Bob Iger. Within it, his name certainly doesn’t carry the drama of the Redstones, the intrigue of John Malone or the provocation of Charlie Ergen (although Iger may disagree, given how Roberts is trying to steal his Fox deal). While many of the media moguls are in the limelight as often as the companies they control, the mild-mannered Roberts has always let Comcast be the focal point and worked shrewdly behind the scenes.
But Roberts, the son of Ralph Roberts, who founded Comcast 55 years ago, is no ordinary chairman and CEO. He’s ingrained in the company—and I mean really, truly, legally ingrained. Check out this section of Comcast’s articles of incorporation:
The Chairman shall be Mr. Brian L. Roberts if he is willing and available to serve. … The CEO shall be Mr. Brian L. Roberts if he is willing and available to serve. For so long as Mr. Brian L. Roberts shall be the CEO, he shall also be the President of the Corporation.
Board members are usually subject to shareholder votes when they’re up for reelection, and CEOs typically renegotiate their employment contracts every few years. But absent the kind of scenarios you can imagine would justify invalidating Comcast’s corporate charter, he’s basically CEO for life, or at least as long as he wants to be. “A bylaw provision that you are in that office as long as you wish is very unusual,” Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware, said in a phone interview.
Having the same person serve as chairman and CEO and a dual-class ownership structure aren’t uncommon in this industry, even if they are frowned upon from a corporate governance standpoint. Through Roberts’s class B shares, he has 33 percent of the voting power at the $148 billion company, which along with Disney was recently overtaken by Netflix Inc. as the world’s most valuable media entity. His interest is “generally non-dilutable,” according to the articles of incorporation. But his presence in the charter (which I can imagine not all investors are even aware of) takes it even further.
In that sense, one can understand why Roberts might not care all that much that Comcast’s other shareholders aren’t fans of the idea of the company spending more than $50 billion to buy assets from Fox or getting into a bidding war with the equally deep-pocketed Disney. Investors like the predictability of Comcast’s cash flows and the growth in its broadband business. Even as Comcast loses cable subscribers, cord-cutters who sign up for services like Netflix still need an internet connection. Comcast has also carefully tiptoed into the mobile market, a disciplined approach that its investors would prefer over the distractions of large-scale M&A.
Comcast’s stock has tumbled more than 20 percent since the rumblings began in early February that it would try to upset Disney’s takeover of Fox. Should it succeed with all-cash bids for Fox and Sky Plc, Comcast’s debt may balloon to more than AT&T’s $163 billion, making it the new largest corporate borrower.
I’m not yet convinced Roberts is ready to go the distance. The Murdochs have every reason to favor a deal with Disney—they get Disney stock, and it may be a quicker process than trying to get regulatory approval for a Comcast transaction. That’s key given that Rupert Murdoch just turned 87 and his son, CEO James Murdoch, seems to want out of the family business. Fox’s other investors may prefer a Disney offer for some of the same reasons, but we’ll have to see what the offers amount to by the time the shareholder vote comes up in July.
As for Comcast’s shareholders, losing this deal may be a win. What a strange dissonance to be rooting against your own chairman, and for it to mean very little.
Tara Lachapelle is a Bloomberg Opinion columnist covering deals, Berkshire Hathaway Inc., media and telecommunications. She previously wrote an M&A column for Bloomberg News.
© Copyright 2021 Bloomberg L.P. All Rights Reserved.