The Walt Disney Company has officially purchased 20th Century Fox and Fox Television
Well today it has become official, Walt Disney Company has purchased many components of 21st Century Fox, including 20th Century Fox, Fox Searchlight Pictures, Fox 2000, 20th Century Fox Television, FX Productions, Fox21, FX Networks, National Geographic Partners, Fox Sports Regional Networks, Fox Networks Group International, Star India and Fox’s interests in Hulu, Sky, and Endemol Shine Group. It was initially reported last month that there were talks of Disney trying to purchase Fox, but then word was talks broke down and Comcast was possibly swooping in to purchase Fox. That all changed once again as Disney will now become even more of an entertainment juggernaut than before. What does this mean for television and cinema? Why should you care? This deal is quite possibly the largest ever merger in the history of entertainment and has many far-reaching ramifications in the industry. I’ll try to outline some of the major ones below. I’m attempting to be as in-depth as possible and there’s likely some aspects of this deal you don’t care about so you can skip to a section below that piques your interest or jump to the bottom for the official press release from the Walt Disney Company.
Film Franchises Now Belonging to Disney
Firstly, as a geek my first thought when reading the headline was that this means the X-Men, Fantastic Four and their corresponding villains could join the Marvel Cinematic Universe. One major difference between Marvel and DC on the big screen is that Marvel does not own the film rights to all of their characters. That has resulted in popular properties such as the X-Men, Spider-Man and Fantastic Four not appearing in their movies and having to rework event films (such as Civil War and Infinity Wars) to not include those characters. Marvel was able to strike a deal with Sony to have Spider-Man appear in their movies (see the full details concerning that relationship here), and fans have been clamoring for them to make a similar deal with Fox ever since.
Now imagine the possibilities. Yes this would mean that characters like Wolverine, Deadpool (who Disney previously stated will remain an R-rated franchise), Mr Fantastic, etc. could finally be seen alongside Marvel staples like Iron Man, Captain America and Spider-Man. From a story standpoint, however, this gives the MCU the ability to bring in other major threats following Thanos in Infinity Wars. They would gain access to villains such as Doctor Doom, Galactus (and by extension Silver Surfer), the Skrulls (I’m a little foggy to what extent Marvel has the rights to the Skrulls because they’re appearing in Captain Marvel in some capacity), etc.
Secondly, Disney would obtain the rights to other major franchises such as Alien, Predator, Planet of the Apes, Kingsman, Die Hard and, most enticing, Avatar. Disney already has a relationship with James Cameron and the Avatar franchise as it has partnered with them to create Pandora – The World of Avatar in their Orlando Disney World park. However, this deal now gives Disney the film rights to the four (yes, four) Avatar sequels moving forward and the future of the franchise afterwards.
Yes, Disney previously purchased Lucasfilm and has the rights to Star Wars and Indiana Jones. However, while George Lucas/Lucasfilm independently produced and financed Empire Strikes Back, Return of the Jedi and the prequels, for the original Star Wars (A New Hope) they partnered with Fox. That means up until this point Disney would not have been able to put out a box set that included the 1977 film along with the other Star Wars movies. I’m happy to say now they can… and perhaps that means we may one day see a version of A New Hope that hasn’t been tampered with (Han shot first).
Television Franchises Now Belonging to Disney
Walt Disney Company now will possess portions of Fox’s television networks. These include Twentieth Century Fox Television, FX Productions and Fox21 (more on what is not included in the deal below). Shows that will now belong under the Disney banner are The Americans, This Is Us, Modern Family, The Simpsons, the recent X-Men television spinoffs (which could potentially interconnect with the Marvel television shows like Agents of S.H.I.E.L.D. or The Defenders), or classic programming like The Mary Tyler Moore Show and M*A*S*H.
Disney has traditionally been known for more family-friendly programming, so it’ll be interesting to see how the merger affects the shows airing on FX. These series, including Atlanta, American Horror Story, Legion and Better Things are a bit more adult than typical Disney fare. Will Disney leave them alone to appeal to a different audience (like they’ve already said they would do with the R-rated Deadpool movies moving forward), or will these shows be changed or discontinued altogether?
Fox’s major sports networks are not part of the deal, but Disney did purchase 22 of Fox Sports’ regional channels. Disney already owns ESPN and therefore is the largest player in televised sports. Accumulating several new regional sports channels will only make their brand stronger.
Last month I wrote about how Disney will be coming out with its own streaming media service in 2019 that will rival Netflix, Amazon, Hulu, etc. They will pull all their Disney content from those networks (besides the Marvel/Netflix collaboration series) and possess exclusive streaming rights to their celebrated library. While Disney is a powerhouse and possesses subsets like Disney Animation, Pixar, Star Wars, Marvel, etc., they still would not be able to compete with the quantity of content available on Netflix. That gap in quantity is no longer as wide.
The timing of this merger is no mistake. One of the main reasons Disney sought to acquire Fox was to bolster their already impressive library with tons of other film and television titles so they’d be able to rival the competition straight out of the gate.
This merger also has far-reaching impacts to Disney’s worldwide offerings with the acquisition of Fox Networks Group International, Star India and Fox’s interests in Hulu, Sky plc, Tata Sky and Endemol Shine Group. To reference the press release, Disney will now own several worldwide services including,
“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.”
Part of the deal is that Fox would continue in their attempts to fully purchase the remaining 61% of Sky that it doesn’t currently own, which would all go to Disney. So Disney could outright own Sky, a worldwide satellite broadcasting service, as well as its outstanding debt.
What the Deal Doesn’t Include
While Disney has accumulated boatloads of additional content, foreign services and technologies, there are components of Fox that were not part of the deal. Fox still possesses the Fox Broadcasting network and stations, Fox News Channel, Fox Business Network, FS1, FS2 and Big Ten Network. These networks will be separated from 21st Century Fox into a newly listed company that will be spun off to its shareholders.
Legal Side and Deal Specifics
For all the details of the deal, please refer to the official press release below. In short, Disney purchased the 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. As part of the deal Disney will also be taking on approximately $13.7 billion of net debt from 21st Century Fox. Here’s the full press release, courtesy of Coming Soon:
The Walt Disney Company and Twenty-First Century Fox, Inc. 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 (subject to adjustment). 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.
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.
What do you think? Are you excited about these properties coming under Disney’s control? Is it bad for Hollywood for one company to own this large a percentage of the industry? Share your thoughts in the discussion board below.