Source: The Walt Disney Co.
Santa visited Rupert Murdoch early this year with Disney’s (NYSE: DIS) agreement to buy 21st Century Fox’s film and TV studios, cable networks and international TV businesses for $52.4 billion in an all-stock transaction. Fox (NASDAQ: FOXA, FOX) will spin off its broadcasting network and stations, Fox News, Fox Business, FS1, FS2 and Big Ten Network to its shareholders. As part of the deal, Robert A. Iger has agreed to stay on at Disney at chairman and CEO through 2021.
‘We are extremely proud of all that we have built at 21st Century Fox, and I firmly believe that this combination with Disney will unlock even more value for shareholders as the new Disney continues to set the pace in what is an exciting and dynamic industry,’ said Rupert Murdoch, Executive Chairman of 21st Century Fox, in a statement.
Source: 21st Century Fox
‘Furthermore, I’m convinced that this combination, under Bob Iger’s leadership, will be one of the greatest companies in the world. I’m grateful and encouraged that Bob has agreed to stay on, and is committed to succeeding with a combined team that is second to none,’ Murdoch added.
The acquisition, which includes the FX Networks, National Geographic Partners, Fox Sports Regional Networks, Fox Networks Group International, Star India and Fox’s interests in Hulu, Sky plc, Tara Sky and Endemol Shine Group, will give Disney a broader spectrum of entertainment options to offer consumers, including streaming video, an area of expansion for Disney.
‘The acquisition of this stellar collection of businesses from 21st Century Fox reflects the increasing consumer demand for a rich diversity of entertainment experiences that are more compelling, accessible and convenient than ever before,’ said Iger.
‘We’re honored and grateful that Rupert Murdoch has entrusted us with the future of businesses he spent a lifetime building, and we’re excited about this extraordinary opportunity to significantly increase our portfolio of well-loved franchises and branded content to greatly enhance our growing direct-to-consumer offerings,’ Iger added. The deal will also substantially expand our international reach, allowing us to offer world-class storytelling and innovative distribution platforms to more consumers in key markets around the world.’
This deal has ramifications that will be felt across the entertainment industry, including the following:
– Disney can expand its direct-to-consumer services such as Hulu and the coming Disney (2019) and ESPN (2018) streaming services.
– Disney will reunite the Marvel family with the X-Men, Fantastic Four and Deadpool.
– The acquisition will expand Disney’s international reach and revenue opportunities.
– With the addition of Sky, Disney can extend into 23 million households in the U.K., Ireland, Germany, Austria and Italy. (Fox currently owns 39 percent of Sky, but plans to acquire the remaining 61 percent prior to the close of the Disney-Fox deal.)
– Fox Networks International offers more than 350 channels in 170 countries.
– Star India offers 69 channels reaching 720 million viewers monthly across India and more than 100 other countries.
– The acquisition could yield at least $2 billion in cost savings by combining the businesses.
– Disney will assume approximately $13.7 billion of net debt of 21st Century Fox.
The big question is how regulators will view the acquisition. While the Trump administration is suing to block the AT&T/Time Warner merger, Trump called Murdoch last Thursday to congratulate him on the deal, said Bloomberg.
When asked how the regulators would scrutinize the deal, Iger said, ‘If they look at it from a consumer point of view, they should quickly conclude that the aim of this combination is to create more high-quality product for consumers around the world and to deliver it in more innovative, compelling ways.’
Insider Take:
Aside from the sheer magnitude of the financial stakes, this acquisition is a big deal, pun intended. Murdoch is selling a company he spent years building. Why? Industry experts have speculated that 21st Century Fox has had a hard time adapting to the changing entertainment industry, in particular, delivering entertainment to consumers where and how they want it, reports The New York Times.
With this deal, Disney can leverage its streaming technology BAMTech to deliver more direct-to-consumer services. It also gives Disney the opportunity to spread its international wings, diversifying its revenue portfolio and expanding its reach into new and emerging markets.
