I have to admit that I know almost nothing about mergers and acquisitions. But this is the first potental merger that, as a Disney shareholder, affects me in any significant way.
So what I’m wondering is, where would Comcast get the shares to give to Disney stock holders in return for their DIS stock? As of this morning DIS had a market cap of $56B vs. about $70B for Comcast. I’m assuming Comcast doesn’t have 56B of stock just sitting around (they also agreed to assume almost $12B in Disney debt; I assume this means bonds?). And if they issued new stock, wouldn’t that dilute the value of the existing shares?
Comcast will issue new shares to give to Disney stockholders (they are offering 0.78 shares for each Disney share). That actually values Disney at $66bn based on share prices at the time of the offer. The $10bn premium over and above the current market cap is a sweetener to get Disney stockholders to agree.
This does not necessary dilute the value of existing shares. Yes, there are lots more shares in circulation but in theory the company is now worth a lot more because it has acquired the Disney business (the combined business market cap is $136bn so the value of each share is the same).
Of course this is all subject to normal stock market forces. For example, the market may consider that Comcast is paying too much for Disney, or that it is a poor strategic move. First reactions seem to indicate that this may be the case: yesterday Comcast shares fell 8% meaning that the offer as it stands is now only worth $62bn.
(I haven’t looked at the deal in detail but the debt will almost certainly be in the form of Disney bonds, which Comcast would then be required to pay the interest on).