Sun Valley Summit: Potential Deal Discussions Could Turn Political

Rupert Lachlan Murdoch - H - 2015

Expect the regulatory environment under Donald Trump — and everything else related to him — to be discussed by the moguls in attendance, most of whom supported his rival, Hillary Clinton, for president.

A couple hundred media moguls are expected in Sun Valley, Idaho, starting Tuesday for the annual, multiday Allen & Co. summit, and speculation is that — in between conversations related to a stormy political climate — executives from Verizon, CBS Corp. and other major companies may be sizing up some of the smaller entities for possible acquisitions.

A recent New York Post report said that Verizon may be considering making an offer for Disney, but while the former's CEO Lowell McAdam is expected to attend the gathering, the latter's CEO Bob Iger is not. It would ostensibly be a merger of equals, with Verizon's market cap at $177 billion while Disney's is at $162 billion.

But while AT&T has indeed agreed to purchase Time Warner for $85.4 billion, you'd be hard-pressed to find a Wall Street analyst who sees a Verizon-Disney hookup anytime soon. Steven Cahall of RBC Capital Markets, for one, calls it "low probability." Verizon, though, is likely shopping for smaller content companies, having completed the acquisitions of AOL and Yahoo already.

Executives also will be mulling the possibility of competing with a combined AT&T-Time Warner. While President Donald Trump suggested during his campaign that the deal should be blocked, he's likely changed his mind as he is anxious to prove his bona fides as anti-regulation and pro-business (on the other hand, he's no fan of CNN, so he probably isn't in the mood to do its parent, Time Warner, any favors).

Other politicians also spoke out against the merger, though some confused Time Warner with Time Warner Cable and have since backed off the rhetoric. Either way, expect the regulatory environment under Trump — and everything else related to him — to be discussed by the moguls, most of whom supported his rival, Hillary Clinton, for president.

Journalists at many of the companies represented at Sun Valley have been accusing Trump of inciting violence against them with a recent video meme in which the president is seen beating up a body with the CNN logo as its head, so the executives will likely hash out the implications of Trump's infamous retweet. Those conversations are especially likely considering Time Warner CEO Jeff Bewkes is expected at the gathering.

Viacom CEO Bob Bakish and CBS CEO Les Moonves are both expected in Sun Valley, and if they're spotted together, it could renew speculation that the sister companies could merge, though some analysts are hoping Moonves goes a different direction.

"I think CBS-Lionsgate is the most interesting and likely [combination]," said Ben Weiss, chief investment officer at 8th & Jackson Capital Management. "Moonves needs to reduce his exposure to advertising, own more content and get greater scale in direct-to-consumer offerings. Buying Lionsgate would allow Les to achieve his major strategic objectives in one fell-swoop."

Some deals of the past that were in part concocted at Sun Valley include the merger of AOL and Time Warner (a disaster that was unwound within a few years), Disney's acquisition of CapCities/ABC (which brought Iger to Disney) and's Jeff Bezos' recent acquisition of The Washington Post.

If executives from Facebook attend, expect them to talk up VR to attendees. The social media giant placed an early bet on the space, which is expected to be a $5 billion business in the U.S. by 2021, with its $2 billion acquisition of Oculus. But slow sales of VR headsets have left a cloud of uncertainty about the new medium and consolidation is expected among the many privately held studios that have popped up in recent years.

Tech is always in vogue at Sun Valley, where Google decided to pay $1.65 billion for YouTube years ago, and executives from various companies are looking for similar home runs this time around. A wave of dealmaking has taken early digital firms such as Maker Studios, AwesomenessTV and Machinima off the market, but digital publishers including BuzzFeed and Vice are still considered acquisition targets. 

Rupert, Lachlan and James Murdoch are expected in Sun Valley, and they'll no doubt be hit with questions about 21st Century Fox's ongoing effort to acquire full control of European pay TV giant Sky. It appears U.K. regulators won't stop the acquisition on grounds Fox is "unfit" due to accusations of racism and sexism at Fox News Channel and Fox Sports, but in the second step of the regulatory process the Murdochs now need to prove they aren't a monopolistic threat.

Streaming sports will also be a topic as ESPN has been losing some subscribers lately and, knowing that younger fans like watching on mobile devices, the NFL has done deals with Twitter and of late. Plus, NFL commissioner Roger Goodell is expected at the Allen & Co. conference.

Some other deals that might spur conversations include announcements Thursday that Cirque du Soleil acquired Blue Man Productions (producer of the Blue Man Group live shows) and that QVC agreed to pay $2.1 billion for HSN.

Also expected to attend this year are Discovery Communications CEO David Zaslav, former AOL CEO Tim Armstrong — now CEO of Oath, which combines Verizon's online media assets, including Yahoo and AOL — CBS COO Joe Ianniello, CBS and Viacom vice chair Shari Redstone, IAC chairman Barry Diller and Fox CFO John Nallen.

Natalie Jarvey and Georg Szalai contributed to this report.