As widely expected Rupert Murdoch is selling most of his Fox company’s media assets to Walt Disney Co in a $US52.4 billion all paper deal.
Disney’s acquisition includes the company’s Twentieth Century Fox film and television studio and its international and cable TV businesses, including 39% of Sky in the UK and Europe and 100% of Star in India.
Disney will also assume about $US13.7 billion of debt of 21st Century Fox.
Fox stockholders will receive 0.2745 Disney shares for each share held and will end up owning about a quarter of Disney.
The Murdochs only own between 16% and 17% of Fox and will end up with just under 5%, but no board positions or influence even though collectively the family trust will be the largest single shareholder in Disney.
The deal will boost Disney in its attempts to become a major player in the video-streaming space, taking on Netflix and Amazon. Chief Executive Bob Iger also wants to power up the company’s television business, and the deal will expand its palate of movies.
Disney is already well on the way to starting its own ESPN sports streaming business next year, along with its own Disney stream. It is taking its product off Netflix and the new assets will make it a giant in this area, as well as in cable TV and film studios.
Immediately before the acquisition, Fox will separate the Fox Broadcasting network and stations, Fox News Channel, Fox Business Network, FS1, FS2 and the Big Ten Network into a newly listed company that it will spin off to its shareholders at around $US10 to $US11 a share.
Disney sees cost savings of around $US2 billion from consolidating assets and businesses. The fate of the 20th Century Fox lot in Hollywood remains interesting – it could be worth $US1.8 billion without a studio. The lot and other property in the deal remains in the control of Fox.
According to Fox CFO, John Nallen, using 2016-17 as a guide, New Fox will have $US10 billion in annual revenues and $US2.8 billion in EBITDA.
Nallen said it would have “a strong investment grade balance sheet” levered with $US9 billion of new gross debt and $US7.5 billion of net debt as well as “robust cash flow.”
Analysts say the deal and split will see the revenue and earnings of Fox News Channel become more transparent. That will confirm that Fox is really based on one giant asset in FNC and the sports channel and TV operations are also rans.
In comments Fox and Rupert Murdoch seemed to suggest that they will be proceeding with the $US16 billion mop up bid for the 61% of Sky not owned by Fox.
But UK regulators told a different story.
The UK Takeover Panel said Thursday that Walt Disney had informed its executive that it doesn’t believe the acquisition of 21st Century Fox should trigger a mandatory bid obligation for Sky PLC.
The regulator said that Disney’s announcement doesn’t alter 21st Century Fox’s obligations under the Takeover Code with respect to its existing offer for Sky.
21st Century Fox, which already owns a 39% stake in Sky, said last year that it intended to buy the remaining 61% in the British media company for 11.7 billion pounds ($15.62 billion) in a deal that is under the scrutiny of U.K. regulators.
The Takeover Panel said it will seek the views of the independent directors of Sky before making a decision on the Disney matter.
