Disney’s Bob Iger, left, and 21st Century Fox’s Rupert Murdoch © Business Wire
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Rupert Murdoch’s 21st Century Fox has agreed to sell its entertainment businesses to Walt Disney in a landmark deal worth $66bn that will shake the global media landscape if it is approved by regulators.
Disney would consolidate its position as the world’s largest media company, adding Fox’s 39 per cent stake in Sky, the pan-European broadcaster, and the 20th Century Fox movie studio to a vast portfolio of brands and intellectual property that spans Mickey Mouse and Buzz Lightyear to Captain America and Han Solo.
For Mr Murdoch, the deal, which values Fox’s equity at $52.4bn and includes Disney assuming $13.7bn of its debt, is a recognition that an industry he once dominated has been irrevocably changed by digital streaming technology and a new generation of deep pocketed global competitors ranging from Netflix to Apple.
But he sounded a bullish note on an investor call. “Are we retreating? Absolutely not,” Mr Murdoch said. “We are pivoting at a pivotal moment.”
As part of the deal Bob Iger, Disney’s chairman and chief executive, has extended his contract to 2021, a move Mr Murdoch said he pushed for in order to bed the deal down. “I’m convinced that this combination . . . will be one of the greatest companies in the world,” he said.
It is unclear if Mr Murdoch’s younger son, James Murdoch, will join Disney as part of the deal, but the Fox chief executive is expected to end his professional association with his father and brother, Lachlan.
“James and I have had a lot of conversations about the future of the two companies,” Mr Iger said. “He will be integral to us integrating these two companies over the next few months. During that time he and I will talk about whether there is a role for him here or not.”
Rupert and Lachlan Murdoch will continue to run the remaining Fox assets — including Fox News Channel — which will be spun off to Fox shareholders. Fox said the spin-off would be “a growth company” centred on live news and sport. “Those of you who know me know that I am a news man with a competitive spirit,” Mr Murdoch said.
The new company will also include Fox’s studio production facility in Los Angeles, which is not included in the Disney deal.
Mr Murdoch added that the new company was “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”.
Rupert and Lachlan Murdoch will also continue to oversee News Corp, the family-controlled publishing company that owns a portfolio of newspapers such as the Wall Street Journal and The Sun.
The agreement between Disney and Fox will not affect Fox’s pursuit of Sky, the UK-based satellite broadcaster. The company is embroiled in a lengthy regulatory review of its planned £11.7bn takeover in Britain. UK regulators are like to rule on the acquisition before US regulators have decided on the Disney-Fox deal.
Disney’s purchase, which also includes Fox’s 30 per cent stake in Hulu, the digital streaming service, and a portfolio of cable television channels, such as FX, is likely to face close regulatory scrutiny in the US.
The US regulatory environment for media deals has been shaken by the Trump administration, which is suing to block AT&T’s $85.4bn takeover of Time Warner — a so-called vertical deal that does not involve the combination of similar businesses.
But the Disney-Fox combination involves multiple overlapping businesses, with key regulatory sticking points likely to include Disney’s dominant position in sport through its ownership of ESPN.
Disney will pay Fox a break fee of $1.52bn if its board changes its mind, and $2.5bn if the deal is blocked by regulators; Fox would pay Disney $1.52bn if it walks away.
Disney was advised by Guggenheim Partners, JPMorgan Chase and law firm Cravath, Swaine & Moore. Fox worked with Goldman Sachs, Centerview Partners, Deutsche Bank and law firm Skadden Arps.
This post originally appeared on Financial Times