Disney Pulls Fox Trigger

The Walt Disney Co. made its video domination aspirations official Thursday, agreeing to buy key assets from 21st Century Fox in a $52.4 billion all-stock deal ($66.1 billion including debt) that will make the world’s biggest content creator even bigger, fueling its plan to become a streaming video and traditional programming powerhouse.

UPDATE: Iger Says Fox Will Help Accelerate Direct-to-Consumer Plans

When the dust settles, Disney will control the 20th Century Fox movie and television production studios, cable channels FX, FXX and National Geographic, 22 regional sports networks and Fox’s 39% interest in European satellite TV service Sky and its 30% interest in streaming service Hulu, in addition to its Disney studios, cable networks ESPN, Freeform and Disney Channel.

Fox, which stands to become a major Disney shareholder as a result of the deal (Disney plans to issue 515 million new shares for the transaction, giving Fox shareholders a 25% pro forma stake in the content giant), will retain its Fox broadcasting operations, Fox News Channel, Fox Business Network and sports channels FS1, FS2 and the Big Ten Network, which will be spun to shareholders prior to he deal closing to ease the tax burden.

Related: Murdoch: Disney Deal a ‘Momentous Occasion’

Under the terms of the deal, Fox shareholders will receive 0.2745 Disney shares for every 21st Century Fox share they hold. Disney will also assume $13.7 billion of 21st Century Fox debt. Overall, the transaction implies a $66.1 billion value for Fox

Disney chairman and CEO Bob Iger has agreed to stay in that role through 2021, adding another year to his employment deal. Iger was originally scheduled to retire in 2019.

“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,” Iger said in a statement. “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.”

Also as part of the deal, Fox will continue to pursue the purchase of the remaining 61% in Sky it doesn’t own. Once that deal is completed, assuming it is done before the Disney deal is closed, Disney would assume full ownership of Sky.

With the Fox assets, Disney will be able to pursue its direct-to-consumer strategy full bore. An ESPN-branded offering, ESPN Plus, is scheduled to debut in 2018 with a Disney content product expected the following year. With the Fox studio assets, that Disney-branded product just got more robust.

The acquisition is expected to yield at least $2 billion in cost savings from efficiencies realized 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.

“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 21st Century Fox executive chairman Rupert Murdoch in a statement. “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.”

Media consolidation critic Public Knowledge was quick to call for a tough government review of the Disney-Fox deal, which it said would combine must-have programming, notably sports, and which it also said would lead to higher prices for video content.

“Antitrust authorities should thoroughly examine the incentives and power a combined Disney-Fox may have to harm consumers and competition," said PK senior policy counsel Phillip Berenbroick.

"Disney’s acquisition of Fox’s regional sports networks, which carry thousands of local NBA, MLB, and NHL games, as well as college athletics, is also a cause for concern," Berenbroick added. "Disney’s ESPN-family of networks is already the most valuable, and most expensive, sports programming network in the cable bundle. The addition of Fox’s regional sports programming may significantly increase Disney’s bargaining power over local cable providers because consumers demand access to their local professional and college athletics.

"The combination of these assets may also give Disney the power to negotiate even higher prices and more preferential treatment for the rest of its video programming, as well as unprecedented control over both national and local televised sports." he said.