Wall Street is rooting for Disney as the media giant reaches
the finish line this week in its 15-month quest to acquire most of Rupert
Murdoch’s film and TV empire. Fox shareholders, on the other hand, are being a
little more cautious.
Disney is
poised to close the $71.3 billion deal that took many twists and turns last
year shortly after 9 p.m. PT on Tuesday. (See timeline below). The birth
of the Murdochs’ successor Fox Corporation — home of Fox Broadcasting, Fox News
and Fox Sports — will also be official on Tuesday.
The completion of the historic
transaction has top Wall Street analysts weighing in with a vote of confidence
in Disney’s big gambit and the leadership of chairman-CEO Bob Iger. Disney
shares have mostly been flat or down since the acquisition was unveiled Dec.
14, 2017, but its been trending up since mid-February in anticipation of the
deal closing. The stock was up 48 cents at the close of trading Friday to
$114.96. It’s up 7% for the year to date.
On Friday, Disney revealed the
selections made by 21st
Century Fox shareholders on whether to receive $38 in stock or cash in
exchange for their Fox shares in the transaction. Slightly more than half —
51.57% — chose cash, while 36.65% chose Disney stock. The remaining 11.79% of
holdings of roughly 1.8 billion shares outstanding did not make a selection by
Thursday’s 5 p.m. ET deadline. Disney had projected that the compensation
breakdown in cash and stock would be about 50-50.
JPMorgan analyst Alexia
Quadrani offered a bullish take on Disney’s chances despite the enormous
challenges ahead with a report this month projecting that its soon-to-launch
Disney+ platform could over time draw as many as 160 million subscribers
worldwide, including 45 million in the U.S.
“While there is little
question there are more DTC services today than ultimately should survive, we
have no doubt that Disney+ remains on the short list of products that should
prevail longer-term,” Quadrani wrote. “Our confidence in the resilient success
of Disney+ comes from the company’s unmatched brand recognition, extensive
premium content and unparalleled ecosystem to market the service.”
Iger is heading into what will
likely be the biggest challenge of his Disney tenure. He’s re-engineering the
studio’s film and TV operations toward direct-to-consumer platforms, and at the
same time the company will be juggling a massive integration process of far-flung
Fox assets including the 20th Century Fox studio, FX Networks, National
Geographic Partners and a vast collection of international channels. The industry
is bracing for the impact of thousands of layoffs, estimated as high as 4,000,
as the companies are consolidated.
Industry analysts recognize
the climb ahead for Disney as it will have to soldier through a period of big
losses of foregone licensing revenue for its movies and TV shows. The hit will
be magnified by the need to invest even more in content overall to support the
direct-to-consumer streaming platforms, which include Hulu, soon to be
majority-owned by Disney, and ESPN+. Disney is banking on Fox’s content engines
and deep vault of titles and IP — not to mention the management stars that come
with the deal — to add heft to the content pipeline that will feed the new
streaming services.
Michael Nathanson, longtime
Disney watcher and analyst for MoffettNathanson, underscored the uniqueness of
Disney’s opportunity to recalibrate its operations for a new era of media.
Disney is fortified by the IP-rich acquisition strategy on Iger’s watch (the
murderer’s row of Marvel, Pixar and Lucasfilm) and also the weight of its own
considerable brand.
“Disney is a brand, not a name
of a corporate holding company, and has clear, well defined and widely embraced
brand strengths plus an undeniable track record of producing excellent
content,” Nathanson wrote in a recent report. “The company has historically
taken big swings… and won over the past few decades. From building theme parks
around the world to acquiring Pixar et al., Disney has continually invested for
long-term growth and sustainability. While Disney+ doesn’t have a paying
subscriber yet, the company will own an unrivaled film and TV library, multiple
mass marketing vehicles to activate consumer interest and a technology platform
in BAMTech that seems to be ready to go.”
As of today, Iger and Co. are in
the final two-day sprint to complete the Fox transaction. Here’s a timeline of
key events in the deal that promises to change the face of Hollywood.
Nov. 6, 2017: CNBC’s
David Faber delivers
the bombshell exclusive that Bob Iger and Rupert Murdoch had been
discussing a possible transaction on and off for several months.
After Faber’s report, Comcast
jumps into the fray in an effort to counter Disney’s bid with an all-cash
offer. Fox juggles talks with Disney and Comcast for a few weeks.
Dec. 11: Disney closes in as
it becomes clear Fox’s board prefers to sell to Iger. Comcast pulls itself out
of the running with a statement asserting it never got the “level of
engagement” necessary to reach a deal.
Dec. 14: Disney and 21st
Century Fox unveil the historic $52.8 billion transaction. Lachlan
Murdoch emerges as the heir apparent for the post-sale Fox Corporation.
After the new year, rumors
increased that Comcast was back to considering a new bid for 21st Century Fox.
The decision would hinge on a federal judge’s ruling in the antitrust trial
against the AT&T-Time Warner merger. At the same time, Comcast also began
looking at mounting a counteroffer against 21st Century Fox for the satcaster
Sky. Fox had been trying to buy the 61% of Sky that it did not own.
Feb. 27, 2018: Comcast unveils
a detailed bid for Sky, mounts a push with analysts.
As the corporate battle
unfolds, industry insiders in Hollywood become obsessed with sorting out the
post-merger org chart. Speculation at Fox about who will go to Disney and who
will not is rampant.
April 25: Comcast formally
unveils $31 billion bid for Sky. Chatter on the Street increases about
Comcast’s preliminary efforts to raise financing for another all-cash bid for
Fox.
May 8: 21st Century Fox CEO James
Murdoch won’t move to Disney if the deal Fox deal closes, the Wall Street
Journal reports.
May 23: Comcast confirms plan
to field counteroffer for 21st Century Fox. Fox’s board re-enters talks with
Comcast and with Disney.
June 12: U.S. District Court Judge
Richard Leon rules overwhelmingly in AT&T’s favor, clearing the path for
its takeover of Time Warner.
June 13: Comcast unveils $65
billion all-cash bid for Fox.
June 20: Disney unveils
revised merger agreement raising price to $71.3 billion. Comcast shifts its
focus to buying Sky.
June 27: The Justice
Department approves the Disney-Fox deal
under the condition that Disney sell Fox’s 22 regional sports networks within
90 days of the deal closing.
July 19: Comcast formally bows
out of the hunt for Fox.
July 27: Disney and 21st
Century Fox shareholders resoundingly approve the deal in separate votes.
Sept. 22: Comcast lands
Sky for $40 billion after outbidding Fox in a blind auction process. Disney’s
Ben Sherwood confirms plan to exit post-merger.
Oct. 8: Fox’s Peter Rice and
Dana Walden are set for top leadership roles at Disney’s TV division, Variety reports.
FX Networks’ John Landgraf and Nat Geo’s Gary Knell will also make the
transition to Disney.
Oct. 18: Fox’s Emma Watts, Fox
Searchlight’s Stephen Gilula and Nancy Utley and Fox 2000’s Elizabeth Gabler
are confirmed to make the transition to Disney.
Nov. 6: The European Union
approves the Disney-Fox transaction
on the condition Disney sell its 50% interest in select European channels owned
through the A+E Networks joint venture with Hearst.
Feb. 27: Brazil approves the
transaction on the condition that Disney sell off its interest in Fox
Sports-branded channels in the market.
March 11: The last regulatory
approval comes through from Mexico, clearing the way for Disney to trigger the
shareholder election period.
March 12: Disney sets March 20
at 12:02 a.m. ET as the closing date.
March 15: Disney announces
that nearly 52% of Fox shareholders elected to take $38 a share in cash while
nearly 37% elected to receive Disney shares.
No comments:
Post a Comment