On 20 March 2019 Disney completed the purchase of most of 21st Century Fox, valued at about $71 billion. What goes to Disney and what stays in the new Fox Corporation.
Disney completed its acquisition of most of 21st Century Fox on 20 March 2019, at 12:02 a.m. US Eastern time. The deal came after approval by the shareholders of both companies in July 2018 and by several regulators, including the US Department of Justice. Disney had announced the agreement in December 2017 at about $52.4 billion and raised it to about $71 billion after a higher offer from Comcast, which was later withdrawn.
How it was structured
The transaction was done in two steps. On 19 March, 21st Century Fox completed the distribution to its shareholders of all the shares of Fox Corporation, the company to which it transferred the businesses Disney was not going to acquire; Fox Corporation is listed on Nasdaq under the symbols FOXA and FOX. The next day Disney took control of the rest. Each 21st Century Fox share could be exchanged for $51.57 in cash or for 0.4517 shares of Disney’s new parent company, with adjustments and proration depending on shareholders’ elections.
Disney also acquired about $19.8 billion of cash from 21st Century Fox and assumed about $19.2 billion of its debt. According to Disney, the value of the transaction, both in equity and in total, is around $71 billion. Its chairman and chief executive, Robert Iger, called the closing an “extraordinary and historic moment” for the company.
What comes in and what stays out
Coming in are the film studios Twentieth Century Fox, Fox Searchlight Pictures, Fox 2000 Pictures, Fox Family and Fox Animation; the television producers Twentieth Century Fox Television, FX Productions and Fox21; the networks FX Networks and National Geographic Partners; Fox Networks Group International; and Star India. Also Fox’s stakes in Hulu, Tata Sky and Endemol Shine Group.
Disney expects cost savings of at least $2 billion by 2021 and the deal to add to its earnings per share, before purchase-accounting effects, in the second fiscal year after closing. In addition, its agreement with the Department of Justice requires it to sell Fox’s regional sports networks. This kind of agreement, a “consent decree”, allows a deal to close in exchange for disposing of specific assets.
The new Fox Corporation keeps the Fox News Channel, Fox Business Network, the broadcast network Fox Broadcasting Company, Fox Sports (with FS1, FS2 and Fox Deportes), the local station group Fox Television Stations Group and Big Ten Network, along with certain other assets and liabilities. It is now an independent listed company; what remains of 21st Century Fox now trades under the symbols TFCFA and TFCF.
What it shows for companies
Large deals are structured in phases and with conditions: a prior spin-off that defines the perimeter, a bid contested by a rival, disposals required by the competition authority and an integration timetable. The cost savings Disney expects usually require integrating workforces, systems and catalogues, and delivery is measured in years. For a family business acquiring or transferring a company, it is worth being clear about which assets and liabilities fall within the perimeter, which approvals are needed and what conditions a regulator may impose. Ask your adviser how this applies to your situation.
In a large purchase, what is left out matters as much as what is acquired.
This article is general information. It is not legal, tax or investment advice, and it does not take anyone’s particular circumstances into account.
