Disney to buys parts of 21st Century Fox in $52.4 billion deal, get Star India and 30% stake in DTH firm Tata Sky
In a landmark deal, Walt Disney Co will acquire many parts of Rupert Murdoch-owned 21st Century Fox, including entertainment and sports assets, for $52.4 billion in stock.
The company will get Fox's movie studios, networks Nat Geo and FX, Asian pay-TV operator Star TV, and stakes in Sky, Endemol Shine Group and Hulu, as well as regional sports networks.
As part of the deal, Disney will also acquire interests in Star India (as well as its content streaming mobile application Hotstar while gaining global rights to professional cricket) and a 30% stake in Tata Sky - Tata Group's direct-to-home (DTH) joint venture with Sky Plc.
Indian media and entertainment industry experts said the deal is a good consolidation in the global market as well as in India.
"Overall for Disney, it is fantastic because they are an incredible brand in the US, but globally they have been only exporting US products. Now with Fox in the kitty, their international presence increases incredibly, primarily because of Sky and secondly due to Star India. It's a huge development for them (Disney) as far as India goes in terms of an asset," said an industry expert requesting not to be quoted.
Interestingly, just last week – on December 5, 2017-- Uday Shankar, the chairman and chief executive of Star India Pvt Ltd, was promoted as president of 21st Century Fox in Asia. While continuing with Star, he will be leading 21st Century Fox's video businesses across all of Asia, including Star India and Fox Networks Group, the company had said then.
On the possibility of Shankar continuing in his new role, experts said, "I would think that will be case because last week they (Disney and Twenty-First Century Fox) were in active negotiations. I don't think they would announce the promotion in the middle of it knowing that they will close this transaction unless it was to signal that he (Shankar) is going to definitely head the combined operations in India and Asia."
Combining with Disney are 21st Century Fox's critically acclaimed film production businesses – Twentieth Century Fox, Fox Searchlight Pictures and Fox 2000 in addition to entities like Twentieth Century Fox Television, FX Productions and Fox21. Disney will also acquire FX Networks, National Geographic Partners, Fox Sports Regional Networks, Fox Networks Group International, Star India (which operates 69 channels reaching 720 million viewers a month across India and more than 100 other countries) and Fox's interests in Hulu, Sky plc, Tata Sky and Endemol Shine Group.
The acquisition of these complementary assets, Disney said would allow it to create more appealing content, build more direct relationships with consumers around the world and deliver a more compelling entertainment experience to consumers. The deal is expected to yield at least $2 billion in cost savings from efficiencies realised through the combination of businesses and to be accretive to earnings before the impact of purchase accounting for the second fiscal year after the close of the transaction.
Rupert Murdoch, executive chairman, 21st Century Fox, said 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. "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," said Murdoch.
Iger will continue as chairman and chief executive officer of The Walt Disney Company through the end of calendar year 2021.
Immediately prior to the acquisition, 21st Century Fox will separate Fox Broadcasting network and stations, Fox News Channel, Fox Business Network, FS1, FS2 and Big Ten Network into a newly listed company that will be spun off to its shareholders.
Under the terms of the agreement, shareholders of 21st Century Fox will receive 0.2745 Disney shares for each 21st Century Fox share they hold. The exchange ratio was set based on a 30-day volume weighted average price of Disney stock. Disney will also assume approximately $13.7 billion of net debt of 21st Century Fox. The acquisition price implies a total equity value of approximately $52.4 billion and a total transaction value of approximately $66.1 billion for the business to be acquired by Disney, which includes consolidated assets along with a number of equity investments.
Prior to the close of the transaction, it is anticipated that 21st Century Fox will seek to complete its planned acquisition of the 61% of Sky it doesn't already own. The transaction is expected close by June 30, 2018. Assuming 21st Century Fox completes its acquisition of Sky prior to closing of the transaction, Disney would assume full ownership of Sky, including the assumption of its outstanding debt, upon closing.
Commenting on the deal, Robert A Iger, chairman and chief executive officer, Walt Disney Co, 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.
"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," said Iger.
MOUSE BELLS THE FOX
- The deal values 21st Century Fox assets in the transaction at $66.1 billion, including $13.7 billion debt
- 21st Century Fox shareholders will get 0.2745 Disney shares for each Fox share held, giving them about 25% of Disney
- Shares of Fox were up fractionally in early trading; Disney traded 1.2% higher
- Fox Broadcasting Co, Fox Sports, Fox News and TV stations would be spun off in new unit
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