This Is Disney's 'Highest Priority' As Fox Deal Transforms Media Sector


Walt Disney (DIS) said Thursday that it has reached a $66.1 billion deal to acquire 21st Century Fox's (FOXA) entertainment assets, as the media giant prepares to up the ante against Netflix (NFLX) and Amazon (AMZN) in streaming content.

X Disney will pay $52.4 billion in stock as well as assume $13.7 billion in debt to buy 21st Century Fox. Disney will get the 20th Century Fox's movie and TV studios, key Fox cable channels, and certain international properties.

Fox will spin off Fox Broadcasting network and stations, Fox News Channel, Fox Business Network, FS1, FS2 and Big Ten Network into a separately traded firm before the Disney takeover.

Disney will pay 0.2745 share for each Fox share, equal to 29.54 as of Disney's Wednesday close.

Combining the two storied giants reshapes further reshapes a media landscape that has already seen major disruption by the tech upstarts and puts Disney in a commanding position to evolve beyond the constraints that have weighed on industry peers, who have seen an exodus of cable subscribers.

The deal also brings Disney's stake in Hulu to 60%, up from 30%. Comcast's (CMCSA) NBCUniversal owns another 30% and Time Warner has a 10% stake in the streaming platform.

Disney and Fox's agreement comes after NBC Universal parent Comcast abandoned its own bid late Monday, amid reports that Fox had seen Disney as a better strategic fit. Other companies that were said to have expressed interest in Fox included Verizon (VZ).

Shares of Disney rose 0.8% before the opening bell on the stock market today, after weeks of speculation that a deal was imminent. Fox jumped 2.3%. Among other media stocks, Comcast, Viacom (VIAB) and CBS (CBS), Time Warner (TWX), which has a deal to be bought by AT&T (T), were all not yet active. Netflix and Amazon were little changed.

It's unclear how regulators may judge the Disney-Fox deal. Assuming antitrust officials approve the merger, they could still impose significant concessions. The Justice Department recently moved to fight the AT&T-Time Warner deal in court.

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A key question that remains is who might be next in line to fill the shoes of Disney CEO Bob Iger, as he agreed to delay his retirement yet again, this time through 2021, to see through the integration of Fox's assets.

Earlier, the Financial Times had reported Fox CEO James Murdoch, son of Rupert Murdoch, had been "suggested" during talks as a possible successor to Iger when he eventually retires.

By super-sizing its library of intellectual property, Disney may be able to more easily brush off concerns surrounding subscriber losses at its media networks unit, in particular at premium sports cable network ESPN. The cord-cutting trend, i.e. people shedding their cable subscriptions, has broadly pushed media companies to offset cable subscriber losses with more streaming options.

Additionally, adding Fox flicks like "X-Men" will round out Disney's Marvel properties, while major film series such as "Aliens" and "Planet of the Apes" will beef up Disney's content stores ahead of the 2019 launch of its standalone streaming app.

That service will already have original content in the form of the powerful "Star Wars" franchise, as well as Pixar and Disney Animation movies, positioning the yet-to-be-introduced platform as a formidable competitor to Netflix and Amazon.


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