Twenty-First Century Fox stock surged on Monday after a report that it is negotiating with Walt Disney to sell most of itself to the House of Mouse. The deal between Fox and Disney is said to be aimed at leaving the former’s news and sports properties and selling the rest to the latter.
Fox and Disney are in on again, off again talks
Citing unnamed sources familiar with the negotiations, CNBC reports that Fox and Disney have been holding talks about a deal, although the two companies are no longer negotiating. The talks reportedly took place within the last few weeks, and it’s not certain they will firm up a deal. Additionally, the negotiations are described as being of an “on again, off again nature,” so they may be “revisited” at some point.
If Fox and Disney were to come to an agreement, Fox wants to sell most of itself to Disney and leave behind “a media company tightly focused on news and sports.” Fox management reportedly believes that the most important near-term goal is scale within media and that acquisitions will not provide a path toward gaining the desired scale.
CNBC’s sources said any potential deal between Fox and Disney wouldn’t have Disney buying all of Fox. Walt Disney can’t own two broadcast networks, so it wouldn’t buy the Fox network. It also wouldn’t buy Fox’s sports programming properties because combining them with ESPN could present antitrust issues. The Fox News and Business channels would also be left behind, as would Fox’s local affiliates, CNBC adds.
The changing media landscape
Executives reportedly believe that Fox could compete more effectively if it consisted of “a more tightly focused group of properties around news and sports.” Facebook, Alphabet’s Google, Netflix and Amazon have dramatically changed the landscape within the media industry, causing big changes in how people consume media and becoming dominant in digital distribution.
Of course, if Fox and Disney come to an agreement, both sides must get something out of it. While Fox would end up with a more tightly focused news and sports business, Walt Disney would gain an additional movie studio and some massive TV production assets. The House of Mouse is preparing two direct-to-consumer streaming products, one for sports and one for major franchises like Marvel and Star Wars, after pulling its content from Netflix. Walt Disney would also benefit from Fox’s international exposure.
CNBC could not learn the possible structure of the deal between Fox and Disney, nor could the price that is being discussed be determined. Both companies are set to release their next earnings reports this week, with Twenty-First Century Fox scheduled for Wednesday and Walt Disney due to release its results on Thursday
Shares of Twenty-First Century Fox jumped by about 10% to as high as $27.49 after CNBC’s report, while Walt Disney shares surged by nearly 3% to as high as $101.12.