Walt Disney acquires 21st Century Fox Inc for $52.4 billion

The deal, representing on the biggest in the movie and television industry in recent years, should be seen in the context of viewers migrating to technology companies such as Amazon.com and Netflix for their on-demand, anywhere, anytime access features. No wonder Rupert Murdoch has characterized the deal as “pivoting at a pivotal moment.”

With Walt Disney Co striking a deal to acquire the television, film and international businesses from Rupert Murdoch’s Twenty-First Century Fox Inc in an all stock deal worth $52.4 billion, the firm has added a host of shows and movies in its repertoire as it prepares to take on entrants including Amazon.com and Netflix.

According to early indications, the deal is unlikely to face strong headwinds from antitrust regulators, unlike the AT&T Corp and the Time Warner Inc deal, which was attacked by U.S. President Donald Trump.

In this case, Trump spoke to Murdoch and congratulated him on the deal, according to the White House.

Ever since the talks of the deal have surfaced, shares of Fox have risen by more than 30%. In comparison, Disney’s shares have risen by 2.7% on the grounds that the company plans on spending, upto $20 billion, for a share buyback plan.

As part of the deal, Disney will assume nearly $13.7 billion of Fox’s debt, while Fox’s shareholders will receive 0.2745 shares of Disney for each share held by them. In totality, Fox’s shareholders will end up owning a quarter of Disney.

The deal, expected to close in in 12 to 18 months, significantly expands Disney’s global footprint since it includes Fox’s international satellite assets, including the Star TV network in India and a stake in European pay-TV provider Sky Plc as well as sports rights in several countries.

Furthermore, new movies and TV shows in the pipeline is likely to enable Disney to wage war on technology companies, who have been siphoning away viewers, on a more even ground.

As per estimates by analysts, Amazon is likely to spend at least $4.5 billion on video in 2017, while Netflix plans on spending $8 billion on content in 2018. These plans close the gap on Disney which spent $13.5 billion on content, and half of that on sports, in its fiscal year, says analysts.

“The deal illustrates the huge strategic challenge traditional media companies face and how they need to reinvent their business models to compete with digital, online competitors such as Netflix, Google and Amazon,” said Nick Jones, partner and head of technology at Cavendish Corporate Finance. “(It) helps Disney dramatically reduce its reliance on traditional television, a business that has declined over the last two decades.”

Explaining Fox’s strategy on the deal to investors, was the company’s CEO, Rupert Murdoch who said, “This will be a growth company, centered on live news and sports brands and the strength of the Fox network”.

He characterized the deal as “pivoting at a pivotal moment.”

As per Disney’s Chief Executive Bob Iger, 66, who will extend his tenure through 2021, “This acquisition reflects a changing media landscape, increasingly defined by transforming technology and evolving consumer expectations”.

Iger highlighted the fact that new technology will be required to meet the demands of viewers who want access to content anytime anywhere.

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Categories: Creativity, Entrepreneurship, HR & Organization, Regulations & Legal, Strategy

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