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 The deal brings to a close more than half a century of expansion
by Murdoch, 86, who turned a single Australian newspaper he
inherited from his father at the age of 21 into one of the
world's most important global news and film conglomerates. The
new, slimmed down Fox will focus on TV news and sport.
Early indications are that the deal will not face strong
resistance from antitrust regulators as AT&T Corp's <T.N> bid to
acquire Time Warner Inc <TWX.N> has done. U.S. President Donald
Trump, who has attacked the AT&T deal, spoke to Murdoch on
Thursday and congratulated him on the deal, according to the
White House.
Shares of Fox, which have surged more than 30 percent since talk
of the deal surfaced in early November, closed up 6.5 percent.
Disney shares rose 2.7 percent, spurred on by the company's plan
to buy up to $20 billion of its own shares to offset dilution
from the all-stock deal. Disney will also assume about $13.7
billion of Fox debt in the deal.
Fox stockholders will receive 0.2745 Disney shares for each
share held and will end up owning about a quarter of Disney.
Under the deal, expected to close in 12 to 18 months, Disney
acquires 21st Century Fox's film and television studios, its
cable entertainment networks and international TV businesses.
That brings marquee franchises like "Avatar" and "The Simpsons"
inside the Mouse House, on top of Iger's previous purchases,
including Pixar Animation Studios, Marvel Entertainment and
"Star Wars" producer Lucasfilm.
The deal also includes 22 of Fox's regional sports networks that
have the rights to televise live games of U.S. professional
baseball, basketball and hockey teams as well as popular college
and high school games.
Disney’s global footprint expands with the acquisition of Fox's
international satellite assets, including Star TV network in
India and a stake in European pay-TV provider Sky Plc <SKYB.L>
and sports rights in several countries.
The new pipeline of shows and movies will help Disney battle
technology companies siphoning audiences away from traditional
TV networks.
Amazon is on track to spend at least $4.5 billion on video this
year, according to analyst estimates, while Netflix plans to
spend $8 billion on content next year. That is closing the gap
on Disney, which spent $13.5 billion on content, half of that on
sports, in the latest fiscal year, according to analysts.
"The deal illustrates the huge strategic challenge traditional
media companies face and how they need to reinvent their
business models to compete with digital, online competitors such
as Netflix, Google and Amazon," said Nick Jones, partner and
head of technology at Cavendish Corporate Finance. "(It) helps
Disney dramatically reduce its reliance on traditional
television, a business that has declined over the last two
decades."
'NEW' FOX
Immediately before the acquisition, Fox will separate the Fox
Broadcasting network and stations, Fox News Channel, Fox
Business Network, its sports channels FS1, FS2 and the Big Ten
Network, into a newly listed company that it will spin off to
its shareholders.
"This will be a growth company, centered on live news and sports
brands and the strength of the Fox network," 21st Century Fox
Executive Chairman Murdoch told investors. He said Fox was not
retreating, rather "pivoting at a pivotal moment."
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Disney Chief Executive Bob Iger, 66, will extend his tenure through
the end of 2021 to oversee the integration of the Fox businesses. He
has already postponed his retirement from Disney three times, saying
in March he was committed to leaving the company in July 2019.
If Iger sees out his new term, that would rule out a presidential
bid in 2020, which had been the subject of some speculation.
"This acquisition reflects a changing media landscape, increasingly
defined by transforming technology and evolving consumer
expectations," Iger told investors on a conference call.
He said new technology would be necessary to meet the demands of
viewers who want to access content anytime. Fox's regional sports
networks and cable network puts Disney in a better position to sell
more shows directly to more consumers, he added.
Disney has been struggling to bolster its TV business as
cancellation of cable subscriptions is pressuring its biggest
network, sports channel ESPN.
The company plans to launch its own streaming service in 2019, a
calculated gamble that it can generate more profit in the long run
from its own subscription service rather than renting out movies to
services like Netflix.
It is not clear who will head the new Fox. Iger said current Fox CEO
James Murdoch, Rupert's younger son, will help with the transition
and that the two will discuss whether he will have a longer-term
role at Disney.
SKY'S FUTURE
Through Fox's stake in the Hulu video streaming service, Disney will
assume majority control of one of Netflix's main competitors. Hulu
is also partially owned by Comcast Corp <CMCSA.O> and Time Warner
Inc <TWX.N>.
A majority of antitrust experts contacted by Reuters said the deal
would likely win approval from U.S. antitrust authorities, although
the U.S. Department of Justice may require asset sales or
conditions, they said.
Fox said it remained committed to buying the 61 percent of Sky it
does not already own and expects to win regulatory approval from
Britain and to close the deal by the end of June, 2018.
Britain’s Takeover Panel said Disney had informed the watchdog that
should it only buy 39 percent of the company - if Murdoch fails to
buy the rest of Sky - it did not think it should be forced to make a
full bid for the company. The statement prompted Sky’s stock to fall
by 1 percent.
In Britain, any investor acquiring 30 percent of a listed company is
automatically forced to make a bid for the rest of the stock. The
Takeover Panel said it would seek the opinions of Sky’s independent
directors before making a decision.
(Additional reporting by Susan Heavey in Washington, Lisa Richwine
in Los Angeles, Diane Bartz in Washington, Sheila Dang in New York
and Kate Holton in London; Editing by Patrick Graham and Bill Rigby)
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