Walt Disney signed a deal to buy film, television and international businesses from Murdoch’s Twenty-First Century Fox for $52.4 billion in stock.
An agreement was signed on Thursday, which would trigger an automatic review by the US Department of Justice (DOJ).
Regulatory approval through by the DOJ is not a foregone conclusion, but it’s not as contentious as AT&T’s $86 billion bid to purchase Time Warner.
The cash and stock offer could make the Murdochs the largest individual shareholders in Disney, although still minority shareholders overall.
Comcast and a few other companies are still in negotiations with Fox.
What’s for Sale?
Twenty-First Century Fox has five major business units, four of which make up the subject-matter of the proposed sale.
The biggest asset is Fox’s regional sports networks, which are worth $22 billion. Next are international cable networks worth $14 billion. The film and television studios are estimated at $13 billion. And domestic cable networks, such as FX and NatGeo, are worth an additional $9 billion.
By combining the portfolio, the buyout ranges from $50 to $60 billion.
Fox would retain control of its broadcast and local stations, including Fox News and Fox Sports Networks, which are worth $21 billion. The Murdochs would likely merge these with News Corp.
What’s at Stake?
The opportunity for Disney to acquire a competing studio is a generational consolidation for the big six Hollywood studios – Disney, Fox, Paramount, Sony, Universal and Warner Bros.
In addition to Fox’s studio assets, the acquisition would give the buyer outright control of X-Men characters, access to previously withheld Marvel properties, the Avatar sequels, and ownership of networks such as FX and National Geographic.
The deal would also give the winner a controlling stake in Hulu.
Hulu offers on-demand and live TV packages and is owned by Comcast (30%), Disney (30%), Fox (30%), and Time Warner (10%).
Under Disney’s CEO Bob Iger, the company added Pixar Animation in 2006 for $7.4 billion, Marvel Entertainment in 2009 for $4 billion, and Lucasfilm in 2012 for $4.06 billion
Iger (66) is only under contract until 2019, after which he is exploring a run for the presidency of the US. The Murdochs want to extend his commitment if Disney buys.
For Comcast, the buyout would add to NBCUniversal, which acquired Dreamworks for $3.8 billion.
Merger Mixed Messages
The DOJ’s stance towards several proposed mergers by media conglomerates is somewhat mixed.
The DOJ is suing AT&T to block the company’s $86 billion purchase of Time Warner. AT&T acquired DirecTV in 2015 for $48.5 billion to become the nation’s largest pay-TV provider.
The government has said the merger of massive television distributors with content creation would hinder competition and hurt consumers.
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However, in contrast, on November 16, the U.S. Federal Communications Commission voted 3-2 to remove legal obstacles preventing media companies from creating local near-monopolies.
Conceivably, Disney would overcome such antitrust challenges since the company doesn’t own any television services at present, but are planning to launch a stand-alone streaming service in 2018.
However, a majority stake in Hulu, especially as Disney prepares to launch a stand-alone streaming service in 2017 could cause problems.
Once Bitten, Twice Shy
The Murdochs are making another bid to acquire the remaining 61% of Sky, the British pay-TV network, this time with Fox instead of News Corp.
Twenty-First Century Fox already owns 39% of Sky. Under the preliminary terms of the proposed takeover, Fox would acquire the remaining 61% for £11.5 billion.
News Corp. failed to buy Sky outright in 2010 after the phone-hacking scandal at the News of the World tabloid which torpedoed the deal. The ongoing process is mired in political and personal pitfalls.