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21st Century Fox (FOXA) Stock Shares Surge After Disney (DIS) Deal Made Official

By Benjamin Rains, Zacks Investment Research

Shares of Twenty-First Century Fox Inc (NASDAQ:FOXA) surged on Thursday morning after the entertainment giant’s highly anticipated deal with the Walt Disney Co (NYSE:DIS) became official.

21st Century Fox (FOXA) Stock Shares Surge After Disney (DIS) Deal Made Official
Source: Shutterstock

The companies announced in a joint statement Thursday that they entered into a definitive agreement that will see Disney acquire a substantial amount of 21st Century Fox’s assets, including the Twentieth Century Fox television and film studios. The deal, which also includes international TV businesses and cable offerings, is worth $52.4 billion in stock.

Disney will also officially acquire FX Networks, National Geographic, Fox Sports Regional Networks and Fox Networks Group International. Furthermore, Star India, U.K. TV power Sky plc (OTCMKTS:SKYAY), Fox’s 30% stake in streaming giant Hulu, and a few other assets, are also set to fall under Disney’s umbrella.

Notably left out of the deal are Fox News; Fox Business; the main Fox Broadcasting network; and 21st Century Fox’s popular cable sports channels FS1, FS2 and the Big Ten Network. Fox will retain these assets in a newly listed company, which will be spun off to its shareholders.

As part of the deal, Disney will also take on roughly $13.7 billion of 21st Century Fox’s debt. This brings the total value of the planned transaction to $66.1 billion. Current 21st Century Fox shareholders are scheduled to receive 0.2745 shares of Disney for every 21st Century Fox share they hold.

Disney’s Wins?

Disney made this deal to try to bolster its arsenal of entertainment assets as the race to provide consumers with the most content heats up. By joining the array of Fox’s filmed entertainment assets with Disney’s content, the new company should be better positioned to entice customers with a planned over-the-top, direct-to-consumer platform.

“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,” Disney CEO Robert Iger said in a statement.

The newly strengthened Disney also takes a controlling interest in Hulu and inches closer to a sports stranglehold, even as ESPN struggles, with the acquisition of Fox’s 22 regional sports networks.

What’s more, Disney boosts its international reach with powerful new international cable assets that could help it distribute more of the company’s content worldwide, which could eventually lead to the creation of more Disney stores and theme parks.

Disney also pointed directly to the company’s ability to merge Fox’s Marvel assets, which include X-Men and Deadpool, with its widely popular and revenue generating Marvel Cinematic Universe.

Bottom Line

From 21st Century Fox’s standpoint, the company and its owner, Rupert Murdoch, seem to be willing to part ways with valuable assets during these changing media times. Disney, on the other hand, is preparing to take on the likes of, Inc. (NASDAQ:AMZN), Netflix, Inc. (NASDAQ:NFLX) and the array of other new media outlets for years to come.

Yet, there are still concerns that the U.S. Department of Justice, which recently filed an antitrust lawsuit to try to stop the AT&T (T) and Time Warner (TWX) merger, might eventually try to block the Disney and 21st Century Fox deal.

Shares of FOXA rose over 3% and currently hover up around 2.20%. Disney saw its stock price dip marginally.

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