Disney and Fox announce $52bn merger

February 2018 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

February 2018 Issue

The Walt Disney Company is to acquire the film, television and international businesses of 21st Century Fox Inc in a deal worth $52.4bn, the companies have announced.

Fox stockholders will receive 0.2745 Disney shares for each Fox share held and will end up owning about a quarter of the new Disney under the terms of the deal.

The transaction, which is expected to close in mid 2019, will see Disney acquire 21st Century Fox’s film and television studios, and add the company’s cable entertainment networks and international TV businesses to its portfolio of brands. However, Fox News, the Fox broadcast network and the FS1 sports cable channel will be spun off into a separate entity which Disney will not acquire.

“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 Robert A. Iger, chairman and chief executive of The Walt Disney Company. “We’re honoured 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. 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.”

“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. “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.”

Whether the deal will face strong antitrust opposition is yet to be seen. While the transaction has been supported by president Trump, some lawmakers have begun to express concerns. Senator Amy Klobuchar, the ranking Democrat on the Senate antitrust oversight committee, has requested a hearing on the proposed mega-deal, and has voiced concerns that the acquisition would concentrate too much power in the hands of a single Hollywood studio, and result in consumers paying higher prices for entertainment.

Should the deal win regulatory approval, it would represent a landmark moment in the struggle between traditional TV networks and digital, online competitors like Netflix, Google and Amazon. With over the top streaming services committed to spending billions on original content in the coming years, Disney, which is entering the streaming market in 2019, will benefit from the strong pipeline of content available to it following the completion of the deal. As a result, Disney will be transformed from a more traditional media company dependent on TV distributors, to a company which can stream content directly to consumers across a number of different platforms. Disney will also gain majority control of the Hulu video streaming platform which has around 32 million customers. Netflix, by comparison, has more than 100 million customers.

Given that box office ticket sales are declining and conventional television viewing is in decline among key demographics, thanks to so-called ‘cord cutters’, the streaming battleground will be a crucial one in the coming years.

Fox has confirmed that the merger will not impact its acquisition of the 61 percent of Sky TV that it does not currently own. That deal is expected to close in June 2018, pending British regulatory approval.

Richard Summerfield