Walt Disney Co (NYSE:DIS) and Twenty-First Century Fox Inc (NASDAQ:FOXA) are reportedly another step closer to a deal that has the House of Mouse acquiring some of Fox’s assets. Reports suggest that Walt Disney and Fox could announce a deal as soon as tomorrow. From the stock price action on Fox, it doesn’t look like shareholders are too thrilled with the reported terms of the deal, however.
New details about Walt Disney and Fox emerge
Comcast reportedly dropped out of the negotiations to acquire Fox’s TV and movie assets on Monday. According to CNBC, its sources say Walt Disney has given an enterprise value of $60 billion to Twenty-First Century fox’s TV and movie assets.
If the deal closes, Fox shareholders would own 25% of the combined company. They will reportedly receive one share of the company that contains what’s left of Twenty-First Century Fox, plus Disney shares within a fixed exchange ratio. What’s left of Fox is expected to have EBITDA of $2.8 billion and be worth $10 per share.
Walt Disney and Fox could officially announce a deal as early as tomorrow, CNBC’s sources said. However, no announcement about the new company’s management is expected, they added.
Synergies estimated at $2 billion
There have been unsubstantiated reports that Fox was interested in selling its TV and movie assets for months. The company is reportedly looking to sell its movie studios and franchises, TV channels, and stakes in Hulu and Sky, among other entertainment properties. Fox’s news and sports properties would be left after the transaction.
In a note on Wednesday, GBH Insights analyst Daniel Ives said he sees big synergies in box office and advertising by tying Fox’s TV and movie studios with Disney’s entertainment assets. He estimates the combined company’s share of the domestic box office market at 35% to 40% and pegs the likely synergies at about $2 billion in the first 12 to 18 months.
A Walt Disney and Fox combo can compete better in streaming
Ives called the expected tie-up between Walt Disney and Fox “a home run deal for Disney.” He feels it’s the right decision even though it’s “an aggressive acquisition with a high price tag.” Additionally, he said this is the right time to make such a deal because it will better equip Disney to battle Netflix’s “golden streaming sandbox” and other streaming leaders such as Amazon.
He feels that Walt Disney’s reasoning behind the acquisition is “the impending battle royale for content and streaming services” up against Netflix. He also believes that Disney’s decision to pull its content from Netflix and launch its own streaming service in 2019 was “the first shot” in the streaming war. He also noted that having a controlling stake in Hulu would also be beneficial for Walt Disney in terms of streaming.
After CNBC’s report, shares of both Walt Disney and Fox declined, with the former falling less than 1% to $106.88 and the latter slipping 3.21% to $33 per share.