Arthur J. Villasanta – Fourth Estate Contributor
Anaheim, CA, United States (4E) – The Walt Disney Company, the second largest media and entertainment conglomerate in the U.S. after Comcast, acquired key assets of 20th Century Fox for $52.4 billion in all-stock deal that might yet be scuppered by federal regulators 12 to 18 months from now.
Disney’s acquisition of most of Fox is the second largest merger and acquisition for 2017. It follows by just eight days the acquisition by managed health care company, Aetna Inc., of retail and healthcare firm CVS Health for $70 billion on Dec. 3.
Looming like an ominous cloud over the Disney-Fox deal is the U.S. Department of Justice that filed a lawsuit on Nov. 20 to block AT&T’s takeover of Time Warner. The $85 billion deal was announced by the two companies on Oct. 22, 2016.
In its lawsuit, the DOJ argues the deal violates antitrust law because AT&T would likely “use its control of Time Warner’s popular programming as a weapon to harm competition.”
The DOJ’s Antitrust Division under Trump appointee Makan Delrahim claims the merger will give AT&T the ability to withhold and boost prices for Time Warner’s cable channels, and that costs will eventually be passed onto consumers.
AT&T and Time Warner, however, brushed aside the DOJ concerns, and see the DOJ’s actions as contrary to years of precedent when it comes to so-called “vertical mergers.”
At its core, the deal between Disney and 21st Century Fox is an attempt by Disney to bolster its TV and film businesses against new competitors and technologies in the content arena.
By acquiring the most profitable parts of 21st Century Fox, Disney hopes that more cable networks, production studios and other properties will come on board to provide the cash it needs as it ventures into the direct-to-consumer streaming distribution business with sports and entertainment services planned to launch in 2018 and 2019.
Under the deal closed on Dec. 11, 21st Century Fox will spin-off Fox Broadcasting Co., Fox Sports, Fox News, Fox Television Stations and a handful of other assets into a new company that will have revenue of $10 billion and earnings of about $2.8 billion.
The deal values the 21st Century Fox assets at $66.1 billion, including $13.7 billion in 21st Century Fox debt.
Disney expects to realize $2 billion in cost savings from combining Disney and Fox’s overlapping businesses within two years of the deal’s closing.
“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,” said Disney CEO Bob Iger.
“We’re honored and grateful that 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 distribution platforms to more consumers in key markets around the world.”
“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,” said 21st Century Fox chairman Rupert Murdoch.
“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.”
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