What Disney Bought: A Billion-Dollar Breakdown of Assets

Now that the megadeal is done and the smoke has cleared, there’s a price tag that can be put on each asset moving from Fox to Disney. Analyst estimates vary; the numbers below are derived from RBC Capital Markets.

Disney is getting two groups of channels from Fox: FX Networks and National Geographic Channels. FX is the home of critically acclaimed, edgy series from “American Horror Story” to “Fargo”–exactly the kind of content Disney lacks. Nat Geo has just begun to broach that business with scripted fare like “Genius,” but it’s a classic brand that fits perfectly with Disney’s portfolio, and one that is already translating nicely to digital platforms like Snapchat.

That they may represent the priciest assets in the whole deal is less a reflection of their future worth and more a testament to how valuable linear channels have been over the past decade, given the billions of dollars in advertising and affiliate fees they’ve brought to Fox. But Murdoch’s willingness to give them up is proof positive that the pay-TV business is in a state of secular decline, one that will provide plenty of short-term value but limited in the long term. Digital channels like FXX and NatGeo Wild are probably going to be retired eventually.

With ho-hum franchises like “Kingsmen” and “X-Men,” Fox certainly can’t hold a candle to what Disney has accomplished as a movie studio, though there’s still value to be mined with the upcoming “Avatar” sequels and the expected commingling of their assorted superhero characters. The valuation here is probably more based on the greater successes Fox has enjoyed in TV from animation (“The Simpsons”) to comedy (“Modern Family”), where syndication has proved a veritable goldmine. TV production capabilities will be absolutely key to powering Disney’s intent to go head to head with Netflix in the streaming game come 2019.

At first blush, it might seem counterintuitive for Disney to pay so much for what is essentially a satellite-based operation, a business with dim future prospects. But there is so much more to Star than that: It not only provides more international exposure for Disney in a business where it’s under-represented, but India may be the biggest growth market on the globe. Best of all, Star has an OTT platform, HotStar, that already has over 50 million subscribers and rights to must-have sports content in the region like cricket. As Disney mounts a global OTT effort, this could become a very valuable piece of the puzzle.

With ESPN becoming something of an albatross around Disney’s neck these days, doubling down on sports might seem a strange move. But having 22 RSNs across the country that boast deals with some of the greatest franchises — like the home run-happy New York Yankees with Aaron Judge and Giancarlo Stanton — could help shore up the faltering economics underpinning ESPN. Incredible affiliate fees will be a great buffer for Disney in the short term while it mounts a risky multi-year effort around OTT that may not provide desired returns for quite some time.

The value here is mostly tied up in Sky, where Fox had been engaged in a torturous, possibly doomed effort to snap up the 61% portion of the satcaster it doesn’t own. Handing that over to Disney could help ease the regulatory path to getting a deal done; the combination of Sky and STAR will give Disney an incredible international footprint across two continents.

The rest of these investments are tied up in Endemol, a production hub that could also help TV production efforts, and Hulu, where Disney will take a controlling interest. Hulu could become a valuable contributor to Disney’s overall OTT efforts given the head start the joint venture has in this space.

Total Enterprise Value of What Disney Is Buying From Fox: $66.1 billion

Fox Debt Disney Will Assume: $13.7 billion

Sale Price $52.4 Billion

From Variety

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Disney Buying Most of 21st Century Fox for $52.4 Billion

Disney is buying a huge chunk of 21st Century Fox in a deal that promises to reshape the media industry and help the entertainment giant fend off digital rivals such as Netflix.

The $52.4 billion deal will combine two of the biggest players in Hollywood.

The sale represents a remarkable turn in the career of octogenarian mogul Rupert Murdoch, who is cashing out after building a major media empire. For its part, Disney is adding even more prime entertainment assets to an already swollen portfolio as it battles upstart streaming services that have undercut the traditional cable subscription model.

In addition to 21st Century Fox’s movie studio and regional sports networks, Disney is buying cable channels FX and National Geographic. Disney will also get Fox’s stakes in Hulu and European pay-TV provider Sky.

Prior to the deal closing, 21st Century Fox will separate the Fox broadcasting network, Fox News Channel, Fox Business Network, and some national sports networks into a new company that will be spun off to its shareholders. The remaining properties would ideally in the coming years merge with News Corp., from which they split in 2013, Murdoch said on Fox Business Thursday morning.

Disney, which counts ESPN among its crown jewels, has suffered as consumers switch off their TVs and spend more hours watching streaming services such as Netflix that are distributed directly to consumers.

The deal allows Disney to expand its content, especially for streaming services. In addition to a majority stake in Hulu that it will have once the deal closes, Disney is preparing to launch two separate streaming services, one for sports and another focusing on entertainment. And it is pulling its content from Netflix in preparation for the launch. Adding Fox’s television and movie studios and the content they own means adding to the stable of must-watch content it can offer directly to consumers — and that streaming competitors can not.

There are also important international assets involved. Fox is in the midst of a lengthy regulatory review in the United Kingdom to take over the rest of the satellite broadcaster Sky it does not already own. In the announcement, Disney and Fox said “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.” Disney would then assume full ownership of Sky as long as Fox’s transaction is completed before Disney’s.

If the deal doesn’t close, then Disney will retain Fox’s current 39 percent stake of Sky “and we imagine they’ll make their own bid for the rest of it,” Murdoch said on Fox Business on Thursday.

The deal will needs to undergo regulatory review and will likely take at least a year to close. The Justice Department, which last month sued to block AT&T’s purchase of CNN parent company Time Warner, will consider to what extent the new company could dominate the market, using its increased leverage to force cable companies and distributors to pay higher rates to carry Disney and Fox content.

News of a possible deal first came to light in early November when CNBC reported that Disney had approached 21 Century Fox about a deal to acquire the movie and television assets. That led to other companies, like Comcast, to explore an acquisition as well. But on Monday Comcast said in statements to media outlets that it “never got the level of engagement needed to make a definitive offer” and was withdrawing from the discussions.

As the two companies work to complete the deal and Disney works to integrate its new assets, Bob Iger, who had been expected to retire, will remain as chairman and CEO of Disney through 2021.

Speaking on Fox Business Thursday morning, Murdoch said he made it a condition of the deal that Iger would stay on.

“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.”

There had been some reporting that Murdoch’s son James, currently CEO of 21st Century Fox, would move over to Disney in a high level role and as a possible successor to Iger. But in a conference call with investors on Thursday morning, Iger said there are no immediate plans for James Murdoch.

“James and I have had a lot of conversations about the future of these companies,” Iger said. “He will be integral to helping us integrate these companies over the next number of months and during that period of time we will continue to discuss whether there is a role for him here or not.”

In a statement of his own, Murdoch said, “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.”

From CNN Money

Bob Iger Could Stay at Disney Beyond 2019 if 21st Century Fox Deal Happens

Walt Disney has already delayed the departure of longtime chairman and CEO Bob Iger a few times. But if a much-hyped (and, currently, only rumored) acquisition of 21st Century Fox actually does happen, then Iger reportedly could extend his tenure beyond his currently planned July 2019 retirement date.

The Wall Street Journal reported on Wednesday that Disney’s board is likely to extend Iger’s contract once more if the company’s reported negotiations to buy a large chunk of Fox’s entertainment assets do, in fact, result in a deal. Rumors that Disney may be talking to Fox about acquiring most of the latter’s movie and cable TV assets, including its valuable regional sports networks, first popped up in early November. Now, reports peg the value of a potential deal at anywhere from $40 billion to $60 billion, based on anonymous sources, with the companies possibly set to reach a final agreement as soon as next week.

In March, Disney’s board officially extended Iger’s contract until July 2019, marking the third (at that time) postponement of his planned retirement from the company. The chief executive, who took the reins at Disney in 2005, had most recently been set to retire in the summer of 2018. The main reason for Iger sticking around has been Disney’s inability to name an heir apparent, though Fox’s James Murdoch is now being floated as a potential successor if the deal is finalized.

Disney is coming off a recent fourth quarter that fell short of Wall Street’s earnings expectations, marked by the continuing struggles of the company’s television unit. Meanwhile, the company is looking to mount a huge challenge on the streaming front, with plans to launch two standalone streaming services—one dedicated to live sports and another for movies and TV—over the next two years. So, it’s possible that Disney would prefer for Iger to stick around a bit longer to oversee the aftermath of a potential megadeal and the packaging of Fox’s vast entertainment assets with Disney’s for the two streaming services.

From Fortune