Walt Disney to acquire 21st Century Fox for $52 bn
14 December 2017
Walt Disney Company is acquiring the film, television and international businesses of Rupert Murdoch's Twenty-First Century Fox Inc in a $52.4 billion all-stock deal, as the US entertainment giant seeks scale to fight growing competition from digital rivals.
The deal also brings to a close more than half a century of expansion by Murdoch, 86, who turned a single Australian newspaper company that he inherited from his father at 21 into one of the world's largest news and film conglomerate.
The Walt Disney Company and Twenty-First Century Fox Inc today announced the signing of a definitive agreement for Disney to acquire 21st Century Fox, including the Twentieth Century Fox Film and Television studios, along with cable and international TV businesses, for approximately $52.4 billion in stock (subject to adjustment).
The acquisition of these complementary assets would allow Disney to create more appealing content, build more direct relationships with consumers around the world and deliver a more compelling entertainment experience to consumers wherever and however they choose, Walt Disney stated in a release.
Immediately prior to the acquisition, 21st Century Fox will separate the 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 (subject to adjustment for certain tax liabilities). 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 (in each case based on the stated exchange ratio assuming no adjustment) for the business to be acquired by Disney, which includes consolidated assets along with a number of equity investments.
Combining with Disney are 21st Century Fox's critically acclaimed film production businesses, including Twentieth Century Fox, Fox Searchlight Pictures and Fox 2000, which together offer diverse and compelling storytelling businesses and are the homes of Avatar, X-Men, Fantastic Four and Deadpool, as well as The Grand Budapest Hotel, Hidden Figures, Gone Girl, The Shape of Water and The Martian-and its storied television creative units, Twentieth Century Fox Television, FX Productions and Fox21, which have brought The Americans, This Is Us, Modern Family, The Simpsons and so many more hit TV series to viewers across the globe.
Disney will also acquire FX Networks, National Geographic Partners, Fox Sports Regional Networks, Fox Networks Group International, Star India and Fox's interests in Hulu, Sky plc, Tata Sky and Endemol Shine Group.
''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,'' said Robert A Iger, chairman and chief executive officer, The Walt Disney Company. ''We're honored 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.''
''We are extremely proud of all that we have built at 21st Century Fox, and I firmly believe that 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,'' said Rupert Murdoch, executive chairman of 21st Century Fox. ''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.''
At the request of both 21st Century Fox and the Disney board of directors, Iger has agreed to continue as chairman and chief executive officer of The Walt Disney Company through the end of calendar year 2021.
''When considering this strategic acquisition, it was important to the board that Bob remain as chairman and CEO through 2021 to provide the vision and proven leadership required to successfully complete and integrate such a massive, complex undertaking,'' said Orin C Smith, lead independent director of the Disney board.
''We share the belief of our counterparts at 21st Century Fox that extending his tenure is in the best interests of our company and our shareholders, and will be critical to Disney's ability to effectively drive long-term value from this extraordinary acquisition.''
This transaction will enable Disney's recently announced Disney and ESPN-branded DTC offerings, as well as Hulu, to create more appealing and engaging experiences, delivering content, entertainment and sports to consumers around the world wherever and however they want to enjoy it.
The agreement also provides Disney with the opportunity to reunite the X-Men, Fantastic Four and Deadpool with the Marvel family under one roof and create richer, more complex worlds of inter-related characters and stories that audiences have shown they love.
Disney gets a global boost
Adding 21st Century Fox's premier international properties enhances Disney's position as a truly global entertainment company with authentic local production and consumer services across high-growth regions, including a richer array of local, national and global sporting events that ESPN can make available to fans around the world. The transaction boosts Disney's international revenue mix and exposure.
Disney's international reach would greatly expand through the addition of Sky, which serves nearly 23 million households in the UK, Ireland, Germany, Austria and Italy; Fox Networks International, with more than 350 channels in 170 countries; and Star India, which operates 69 channels reaching 720 million viewers a month across India and more than 100 other countries.
Prior to the close of the transaction, it is anticipated that 21st Century Fox will seek to complete its planned acquisition of the 61 per cent of Sky it doesn't already own. Sky is one of Europe's most successful pay television and creative enterprises with innovative and high-quality direct-to-consumer platforms, resonant brands and a strong and respected leadership team.
Assuming 21st Century Fox completes its acquisition of Sky prior to closing of the transaction, The Walt Disney Company would assume full ownership of Sky, including the assumption of its outstanding debt, upon closing.
The acquisition 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.
Under the terms of the transaction, Disney will issue approximately 515 million new shares to 21st Century Fox shareholders, representing approximately a 25 per cent stake in Disney on a pro forma basis. The per share consideration is subject to adjustment for certain tax liabilities arising from the spinoff and other transactions related to the acquisition.
The initial exchange ratio of 0.2745 Disney shares for each 21st Century Fox share was set based on an estimate of such tax liabilities to be covered by an $8.5 billion cash dividend to 21st Century Fox from the company to be spun off. The exchange ratio will be adjusted immediately prior to closing of the acquisition based on an updated estimate of such tax liabilities.
The boards of directors of Disney and 21st Century Fox have approved the transaction, which is subject to shareholder approval by 21st Century Fox and Disney shareholders, clearance under the Hart-Scott-Rodino Antitrust Improvements Act, a number of other non-United States merger and other regulatory reviews, and other customary closing conditions.