The Walt Disney Company to acquire Twenty-First Century Fox for $52.4 billion in stock

Dec 14, 2017 in "The Walt Disney Company"

The Walt Disney Company and Twenty-First Century Fox, Inc. (21st Century Fox) today announced that they have entered into 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.

Disney CEO Bob Iger has also agreed to continue as Chairman and Chief Executive Officer of The Walt Disney Company through the end of calendar year 2021.

Full press release:

Building on Disney’s commitment to deliver the highest quality branded entertainment, 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. 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 as described below). 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.

Popular Entertainment Properties to Join Disney Family

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, Mr. 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.”

Benefits to Consumers

The acquisition will enable Disney to accelerate its use of innovative technologies, including its BAMTECH platform, to create more ways for its storytellers to entertain and connect directly with audiences while providing more choices for how they consume content. The complementary offerings of each company enhance Disney’s development of films, television programming and related products to provide consumers with a more enjoyable and immersive entertainment experience.

Bringing on board 21st Century Fox’s entertainment content and capabilities, along with its broad international footprint and a world-class team of managers and storytellers, will allow Disney to further its efforts to provide a more compelling entertainment experience through its direct-to-consumer (DTC) offerings. 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. The addition of Avatar to its family of films also promises expanded opportunities for consumers to watch and experience storytelling within these extraordinary fantasy worlds. Already, guests at Disney’s Animal Kingdom Park at Walt Disney World Resort can experience the magic of Pandora—The World of Avatar, a new land inspired by the Fox film franchise that opened earlier this year. And through the incredible storytelling of National Geographic—whose mission is to explore and protect our planet and inspire new generations through education initiatives and resources—Disney will be able to offer more ways than ever before to bring kids and families the world and all that is in it.

Enhancing Disney’s Worldwide Offerings

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% 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. 21st Century Fox remains fully committed to completing the current Sky offer and anticipates that, subject to the necessary regulatory consents, the transaction will close by June 30, 2018. 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.

Transaction Highlights

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.

Terms of the transaction call for Disney to issue approximately 515 million new shares to 21st Century Fox shareholders, representing approximately a 25% 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. Such adjustment could increase or decrease the exchange ratio, depending upon whether the final estimate is lower or higher, respectively, than the initial estimate. However, if the final estimate of the tax liabilities is lower than the initial estimate, the first $2 billion of that adjustment will instead be made by net reduction in the amount of the cash dividend to 21st Century Fox from the company to be spun off. The amount of such tax liabilities will depend upon several factors, including tax rates in effect at the time of closing as well as the value of the company to be spun off.

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.

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Article Posted: Dec 14, 2017 / 7:19am EDT
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MisterPenguinJul 02, 2020

Cool. Disney now has the film rights back to them, too, through acquiring 20CF.

Slpy3270Jul 02, 2020

Dark Horse Comics' license to the Alien and Predator franchies has expired and heading to Marvel. https://www.ign.com/articles/alien-predator-marvel-comics-xenomorph-iron-man-avengers

SirwalterraleighJul 01, 2020

...Comcast is good at burning the bridge behind them...no U turns on their road

MisterPenguinJul 01, 2020

Comcast hurt Disney by bidding up Fox. Seems they hurt themselves by bidding up Sky... https://deadline.com/2020/06/why-did-comcast-buy-sky-again-analyst-revisits-deal-for-declining-asset-1202973299/

bartholomr4Apr 09, 2020

I hadn't thought about this thread in awhile.... I wonder what the global pandemic means for the sale of the South American networks?

Ripken10Apr 09, 2020

I felt like you left off "in February" for when Jessica Jones and Punisher would expire.

brodie999Apr 09, 2020

Jeremy Conrad updated us about the Marvel-Netflix situation. Daredevil will be able to be used in the MCU in November this year and Jessica Jones and Punisher's rights at Netflix will expire In February. Not to mention, Luke Cage and Iron Fist will be back in the MCU in in 2-5 months respectively.

bartholomr4Nov 14, 2019

I totally agree. The alternative is Brazil and Mexico finding someone to buy the business for Disney, which is unlikely. Brazil had two potential buyers and neither could execute the deals. I think if Disney guarrantee's access to the networks at a reasonable price (i.e. free with advertising so to speak), the issue goes away ( and Disney ends up keeping the assets). The Cade appears to have 4 openings on the commission. There doesn't appear to be a rush to fill the roles, and once nominated, the candidates have to be approved by the legislature. Just don't think the Gov't in Brazil can or is interested in this condition now.

Rodan75Nov 14, 2019

It is...but I suspect that Disney is going to try and keep the assets both in Brazil and MX and come up with another way of appeasing both regulators.

brodie999Nov 14, 2019

Don't worry. Someone on Reddit posted this is just a dispute over a sports asset not being sold on a specific date. This means the merger won't be undone and this has nothing to do with and has no effect on Marvel.

DarkprimeNov 14, 2019

Huh I thought they had till late 2020 to sell Fox Sports Brazil?

brodie999Nov 14, 2019

Cade is set to re-examine Disney-Fox deal because the Fox Sports sale wasn't finalised yet(I doubt there'll be any problems as Disney is always ready to resolve any last-minute issues).

bartholomr4Oct 10, 2019

Disney registered today with the SEC an Exchange offer for the remaining 21CF debt to convert those bonds to Disney bonds. The exchange amount is for over $14 Billion in bonds which mature from August 2020 to October of 2096. Within the filing Disney confirms the completion of the tender offer (discussed above) on October 3rd. These bonds represent bonds which the current holders did not want to sell back to Disney, or Disney did not (or can't yet) attempt to repurchase. Based on this effort (and complexity) it appears Disney is going to maintain this level of 21CF debt in the short term, and any further tenders are not likely. The purpose of the exchange is to make the bonds more liquid (so current owners can trade them on the bond market) and for the bonds to hold the Disney name. The balances will naturally decline as the bonds (there are 37 different maturity dates) mature. For example Disney must pay off $300 million in the first maturity next August and about $2 billion in principle over the next two years.

bartholomr4Sep 17, 2019

Disney Announced the tender was oversubscribed and increased the amount of debt they are re-purchasing by $2.25 billion. There is a mixture of Disney and 21CF debt being reduced as a result of the repurchase by $4.2 billion. Disney is performing an early closing today on these bonds. The tender for additional bonds continues until September 30th.