Disney to Buy 21st Century Fox Assets, Including Film Studio; Bob Iger Extends Through 2021

The Disney boss' biggest acquisition ever, valued at $52.4 billion, is set to create a global content powerhouse.

Now it's official. The Walt Disney Co. has agreed to acquire big parts of 21st Century Fox in an all-stock deal worth $52.4 billion, or approximately $66.1 billion when including debt, valuing shares of Fox at around $40 apiece while they had traded Wednesday at $32.75.

In another key news update, Disney said that longtime boss Bob Iger has extended his contract as chairman and CEO through the end of 2021.

The acquisition is expected to yield "at least" $2 billion in cost savings "from efficiencies realized through the combination of businesses, and to be accretive to earnings before the impact of purchase accounting for the second fiscal year after the close of the transaction," Disney said.

Asked about opportunities to boost revenue with the deal, Iger said on a call that "we are not getting specific on that," but said using more intellectual property will be a key focus here. Management said the full financial benefits of the deal would become visible by 2021.

The companies are preparing for an extended regulatory review and closing process, with Disney CFO Christine McCarthy on a conference call saying the closing is expected to take 12 to 18 months.

"The boards of directors of Disney and 21st Century Fox have approved the transaction, which is subject to shareholder approval by 21st Century Fox and Disney shareholders, clearance under the Hart-Scott-Rodino Antitrust Improvements Act, a number of other non-United States merger and other regulatory reviews, and other customary closing conditions," they said.

Fox's stock had traded at $25 a month ago, before it was reported the two conglomerates were close to a transaction.

The deal, which has been in the works for weeks and was confirmed early Thursday, will see Disney buying Fox's film and TV studio; the National Geographic and FX cable channels business; regional sports networks; international networks, including Star India; Fox's 30 percent stake in Hulu; and its 39 percent stake in European pay TV giant Sky.

Immediately prior to the acquisition, Fox will separate the Fox Broadcasting network and stations, Fox News Channel, Fox Business Network, FS1, FS2 and Big Ten Network into a newly listed company that will be spun off to its shareholders.

The 53-acre Fox studio lot on Pico Boulevard in Los Angeles will stay with that company that will remain under the control of Rupert Murdoch, though it remains to be seen what the plans are for the $425 million piece of property.

Comcast, which had also looked at a possible bid, had on Tuesday said it was "no longer engaged in the review of those assets" and never submitted a definitive offer.

Disney chairman and CEO Robert Iger, 66, has been set to exit his post in 2019, but amid the deal, he has agreed to extend his contract through the end of 2021.

The deal will make Rupert Murdoch, executive co-chairman of Fox, and sons James (CEO) and Lachlan (co-executive chairman) key shareholders of Disney stock. Fox shareholders are expected to end up with about a 25 percent stake in Disney, with the Murdoch family trust owning around 5 percent, according to Bloomberg estimates.

Disney in announcing the deal focused on how "popular entertainment properties" will join the "Disney family," saying: "Combining with Disney are 21st Century Fox's critically acclaimed film production businesses, including Twentieth Century Fox, Fox Searchlight Pictures and Fox 2000, which together offer diverse and compelling storytelling businesses and are the homes of Avatar, X-Men, Fantastic Four and Deadpool, as well as The Grand Budapest Hotel, Hidden Figures, Gone Girl, The Shape of Water and The Martian — and its storied television creative units, Twentieth Century Fox Television, FX Productions and Fox21, which have brought The Americans, This Is Us, Modern Family, The Simpsons and so many more hit TV series to viewers across the globe."

The Murdochs will be in control of what's left of Fox. James Murdoch could get offered a senior Disney executive role that he would take on once the transaction closes, but the companies didn't immediately announce anything about his future on Thursday beyond Iger saying, "He and I will continue to discuss whether there is a role for him here or not" over the coming months.

"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 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 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."

On a call with analysts Thursday, Murdoch called the deal "a momentous occasion for me, our investors and thousands of colleagues who have joined us over the years in building 20th Century Fox." And he spoke of it as setting up the "next great leg of our journey."

The deal talks between the sector giants surprised longtime Murdoch watchers, as they had always seen the family as buyers rather than sellers. One analyst said the sale was a sign that the Murdochs see the challenges that the entertainment industry has been dealing with, particularly cord-cutting and competition from streaming video services, as increasingly difficult to address.

For Iger, who previously acquired Pixar, Lucasfilm and Marvel, this is the biggest deal ever, and it is designed to widen Disney's lead as the largest content company. In the deal, it acquires Fox's rights to some Marvel movies and Avatar sequels as it gears up to launch a streaming video service meant to compete with Netflix and Amazon.

On Wednesday, analyst Richard Greenfield of BTIG opined that Disney and Fox would face "stiff" regulatory hurdles to get their deal approved and guessed it would take a year or more.

Under the terms of the agreement, shareholders of Fox will receive 0.2745 Disney shares for each Fox share they hold, subject to adjustment for certain tax liabilities. The exchange ratio was set based on a 30-day volume weighted average price of Disney stock. Disney will also assume approximately $13.7 billion of net debt of Fox.