Disney to sell Fox regional sports network for $10.6bn

July 2019 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

July 2019 Issue

In a deal with a total enterprise value of $10.6bn, Walt Disney Company has agreed to sell the equity interests in 21 Regional Sports Networks (RSNs) and Fox College Sports to TV broadcasting giant Sinclair Broadcast Group.

Disney’s RSN portfolio – which excludes the YES Network – is the largest collection of RSNs in today’s marketplace, with an extensive footprint that includes exclusive local rights to 42 professional teams consisting of 14 Major League Baseball teams, 16 National Basketball Association teams and 12 National Hockey League teams.

Together with its subsidiaries, Disney is a diversified worldwide entertainment company, with operations in four business segments: media networks, studio entertainment, parks, experiences and products, direct-to-consumer and international. It is a Dow 30 company and had annual revenues of $59.4bn in 2018. The acquirer of its 21 RSNs, Sinclair, is one of the largest and most diversified television broadcasting companies in the US. Sinclair owns, operates and provides services to 191 television stations in 89 markets.

The RSN portfolio, which delivered a combined $3.8bn in revenue across 74 million subscribers in 2018, will be acquired via a newly formed indirect wholly-owned subsidiary of Sinclair, Diamond Sports Group LLC. Furthermore, Byron Allen – who bought The Weather Channel in 2018 and is the founder, chairman and chief executive of Entertainment Studios, a global media, content and technology company – has agreed to become an equity and content partner in the newly formed RSN Holding Company, an indirect wholly-owned subsidiary of Sinclair and an indirect parent of Diamond.

“This is a very exciting transaction for Sinclair to be able to acquire highly complementary assets,” said Chris Ripley, president and chief executive of Sinclair. “While consumer viewing habits have shifted, the tradition of watching live sports and news remains ingrained in our culture. As one of the largest local news producers in the country and an experienced producer of sports content, we are ideally positioned to transfer our skills to deliver and expand our focus on greater premium sports programming.”

The acquisition of Fox College Sports and Disney’s RSN portfolio joins Sinclair’s existing sports business, which consists of Marquee Sports Network, Tennis Channel and Tennis Media Company, Stadium, Ring of Honor Wrestling and high school sports programming.

“The transaction is expected to be highly accretive to free cash flow and brings consolidated net leverage through the preferred financing,” continues Mr Ripley. “This acquisition is an extraordinary opportunity to diversify Sinclair’s content sources and revenue streams with high-quality assets that are driving live viewing.”

The transaction has been unanimously approved by the board of directors of both Sinclair and Disney. “We are pleased to have reached this agreement with Sinclair for the sale, subject to customary closing conditions and the approval of the US Department of Justice (DOJ),” adds Christine McCarthy, senior executive vice president and chief financial officer at Walt Disney Company.

Guggenheim Securities, LLC, Deutsche Bank Securities Inc., RBC Capital Markets, Pursuit Advisors, and Moelis & Company are acting as Sinclair’s financial advisers, while Fried, Frank, Harris, Shriver & Jacobson LLP, Pillsbury Winthrop Shaw Pittman LLP, Latham & Watkins LLP and Thomas & Libowitz P.A. are acting as legal advisers. Acting as Disney’s financial advisers are Allen & Company LLC and J.P. Morgan, with Cravath, Swaine & Moore LLP and Covington & Burling LLP acting as legal advisers.

Mr Ripley concluded: “We see the acquisition of Disney’s RSN portfolio as an opportunity to realise cross-promotional collaboration, and synergistic benefits related to programming and production.”

Fraser Tennant