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Disney nears pact to acquire assets from 21st century Fox

The deal, expected to be announced Thursday, would value the assets Disney is acquiring at $60 billion, including debt.

By Ben Fritz Dana Mattioli & Joe Flint WSJ 

Photo: Shutterstock

Walt Co. is close to a deal to acquire a large piece of Inc., people familiar with the situation say, in a pact that could help the entertainment giant accelerate its ambitions in streaming media, shore up its television business and grab hold of lucrative movie franchises.

The deal, expected to be announced Thursday, would value the assets is acquiring at $60 billion, including debt. Those assets include the Twentieth Century Fox movie and TV studio, cable channels including regional sports networks and key properties. They don’t include properties such as Fox News and broadcast assets.

The pact would value as a whole at around $40 a share, the people said. would pay $28 to $29 a share for Fox assets, and the all-stock deal would leave Fox investors owning about 25% of the enlarged Disney, one of the people said.

21st Century Fox’s shares closed at $32.75 Wednesday.

Most of the assets is buying would be put to use in Chief Executive Robert Iger’s quest to transform his company into a streaming-video giant that can go head-to-head with rivals such as Netflix Inc. He wants to have its own relationships with consumers and a broad array of content to offer them online.

Mr. Iger also wants to strengthen Disney’s largest business, television, which has taken a hit as consumers cut back on traditional cable packages and spend more time with digital providers.

The deal would mark a significant turn for Rupert Murdoch’s media empire after decades of expansion that created a titan in the entertainment industry. The remaining Fox assets, which would be spun off as part of the transaction, would include the Fox News cable channel, the Fox broadcast network and the 1 sports channel. Fox also will retain real estate including its studio lot in Los Angeles, people familiar with the situation say.

Mr. Murdoch has contemplated eventually merging the remaining Fox assets with News Corp, parent of The Wall Street Journal, people familiar with the matter say. The Murdoch family owns 39% voting stakes in both Such a merger is unlikely in the near term given complexities including how to manage the potential tax bill, the people say.

had other suitors for its assets, including cable giant Comcast Corp. One reason it leaned toward was the perception that the deal wouldn’t face as much scrutiny from antitrust enforcers, a person familiar with the matter said.

The Justice Department has sued to block AT&T Inc.’s attempt to purchase Time Warner Inc., signaling that a deal in which a major content distributor, such as Comcast, is buying a big content company could be heavily scrutinized.

The Disney-raises the prospect of a future in which media is dominated by a few giants: Comcast-owned NBCUniversal, a combined Disney-Fox, and—if it survives the legal battle with the government—AT&T. A group of smaller companies, including CBS Corp., Viacom Inc., Sony Pictures Entertainment and Lions Gate Entertainment Corp. , could look to do their own deals to gain more scale and leverage in the industry.

Media like and Fox are increasingly concerned that the biggest competitive threats in the future won’t come from rival media conglomerates, but rather from technology Netflix and Inc. are building substantial subscription businesses by reaching consumers directly and are investing huge sums in original programming. Meanwhile, Facebook and Google are winning an overwhelming share of digital advertising dollars.

To address that challenge, Mr.

Iger in August announced is making direct-to-consumer streaming services its top priority. The company is launching one called ESPN Plus, meant to supplement its cable sports giant’s TV offerings, in 2018. The following year, plans to launch a family entertainment service that will include most of its movies and television shows, many of which it currently sells to Netflix in a deal that will expire next year.

also spent nearly $2.6 billion for majority control of streaming technology BamTech, which is powering its new digital services.

The Fox acquisition is an acknowledgment by Mr. Iger that will need more help to seize control of the digital moment. With Fox, his company will gain more market power to compete against Netflix and other digital giants and a larger, more-diverse collection of content to offer on streaming platforms.

Buying Fox also would further augment Disney’s collection of franchises. It would gain “Avatar,” which is already represented in the Walt World theme park in Florida under a licensing deal, and Marvel’s X-Men superheroes, to which Fox has had big-screen rights since the 1990s.

would get majority control of Hulu as well, giving it another streaming service to complement the one it is launching in 2019.

A purchase of Fox also would help strengthen its existing television business. Fox’s Twentieth Century Fox Television is one of the industry’s most prolific producers with successful shows on every major broadcast network. Its hits include NBC’s “This Is Us” and ABC’song-running “Modern Family.”

also will get Fox’s biggest television asset—the animated hit “The Simpsons.”which has generated billions in revenue for the company

The addition of 22 regional sports networks will make an even more-potent force in sports programming and potentially give it more leverage in negotiating distribution deals with cable and satellite operators. ESPN will also now be able to use Fox’s regional sports network as a promotional platform.

Acquiring Fox’s 39% stake in the European broadcaster Star will give a much needed footprint in key regions including the United Kingdom, Italy and Germany. Fox has a deal being reviewed by regulators to acquire the 61% of Sky it doesn’t own.

Fox’s Star India is one of the fastest-growing programmers with revenue of $1.3 billion, up from $570 million in 2010. Its earnings before interest, taxes, depreciation and amortization are projected to grow from $230 million in the most-recent fiscal year to $1 billion by 2020.

Mr. Iger was previously scheduled to retire from in July of 2019, but as part of this deal he will stay longer to help integrate the assets, people close to the negotiations have said.

—Liz Hoffman contributed to this article.

First Published: Thu, December 14 2017. 11:12 IST