Disney agrees €44bn deal to buy 21st Century Fox

The deal is likely to come under the scrutiny of regulators in the US

Disney agrees €44bn deal to buy 21st Century Fox

File photo | The Shanghai Disney Resort in east China, 13-01-2017. Image: Xinhua/Ren Long

Updated: 14.40

Media firm 21st Century Fox has agreed to sell its entertainment assets to Walt Disney Co for US$52.4bn (€44.3bn).

The deal will bring together the 20th Century Fox film studio behind hits such as Avatar, X-Men and Ice Age together with Disney's film assets which include Pixar, Marvel and the Star Wars maker LucasFilm.

The pair are respectively the fourth and second biggest movie studios in Hollywood and the deal means the 'big six' that have dominated Hollywood for nearly a century will become a big five instead.

Included in the sale are Fox's US cable networks, including FX and the National Geographic Channel, as well as international pay television assets including Star TV in India.

It also includes Fox's 39.1% stake in British broadcaster Sky plc, the owner of Sky News.

Fox has been trying to buy full control of Sky for the last year and the proposed stg£18.5bn (€21.01bn) takeover, which was launched just over a year ago, is currently being scrutinised by the UK's Competition and Markets Authority.

Fox said it expected that deal to be completed by the end of June next year. Disney would then eventually own the whole of Sky.

Disney could eventually own the whole of Sky | File photo

Other assets included in the deal are Fox's 30% stake in Hulu, the US streaming service, in which Disney is also a shareholder.

The deal is expected to take a year to complete and will be subject to approval by competition regulators both in the United States and in the European Union.

The latter is seen as less likely to have a problem with the takeover but the US, where the US Justice Department has been seeking to block the takeover of Time Warner by the telecoms giant AT&T, may be more difficult.

The combined business will make films that account for two in every five cinema tickets sold in the US - which may raise some concerns among regulators.

Terms of the deal

Under the terms of the deal, Disney will also take on some US$13.7bn (€11.6bn) worth of debt from 21st Century Fox, making the total deal worth US$66.1bn (€55.9bn).

The sale marks a huge turning point in the career of Rupert Murdoch, the executive co-chairman of 21st Century Fox, who has spent the last 65 years assembling his business empire and who has not previously been a significant seller of assets.

Announcing the deal, Bob Iger, the chairman and chief executive of Disney, said: "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.

"We're honoured and grateful 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 platform distribution platforms to more consumers in key markets around the world."

Mr Iger, who was due to step down as Disney boss in July 2019, will now continue in the role until the end of 2021.

Mr Murdoch said: "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.

"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."

Under the terms of the transaction, which will be entirely in shares, investors in Fox will receive 0.2745 shares in Disney for each 21st Century Fox share they currently own.

Shareholders in 21st Century Fox will own 25% of the enlarged Disney once the deal completes.

The remaining assets owned by 21st Century Fox include Fox News, Fox Business, Fox Sports - which has the rights to broadcast the next football World Cup in the US - and a number of local television stations in the US.

Mr Murdoch added: "The new Fox will draw upon the powerful live news and sports businesses of Fox, as well as the strength of our broadcast network.

"It is born out of an important lesson I've learned in my long career in media: namely, content and news relevant to viewers will always be valuable.

"We are excited by the possibilities of the new Fox, which is already a leader many times over."

Disney is not the only company with which Fox has been negotiating.

Comcast, the US cable titan and owner of NBC, had been interested in Fox's entertainment assets, as had Verizon, the US mobile phone operator.

However, Disney is always thought to have been in pole position, as any deal would be in shares and Mr Murdoch is said to prefer the idea of holding Disney's stock rather than that of Comcast or Verizon.