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Updated: Disney to acquire Fox for $52.4B in stock

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Updated: Disney to acquire Fox for $52.4B in stock

In a transaction that significantly changes the media landscape, Walt Disney Co. has reached a deal to buy an array of 21st Century Fox Inc.'s international and domestic assets.

After talks broke down a month ago, Disney and 21st Century Fox have now put the finishing touches on a deal for approximately $52.4 billion in stock that includes 21st Century Fox's movie and TV studios, the FX Networks and National Geographic Partners and its 22 regional sports networks. Additionally, the agreement, announced on Dec. 14, gives Disney Fox's stake and a controlling interest in streaming service Hulu LLC.

Internationally, the transaction bolsters Disney's presence abroad, via Fox Networks International, with more than 350 channels in 170 countries; Fox's fast-growing Star India; and its 39% ownership of satellite giant Sky plc across Europe. Prior to the close of the transaction, it is anticipated that 21st Century Fox will seek to complete its planned acquisition of the 61% of Sky it doesn't already own.

Immediately prior to the acquisition, 21st Century Fox will separate the Fox Broadcasting network and stations, FOX News Channel (US), FOX Business Network (US), FOX Sports 1 (US), FOX Sports 2 (US) and Big Ten Network into a newly listed company that will be spun off to its shareholders.

Under the terms of the agreement, shareholders of 21st Century Fox will receive 0.2745 Disney share for each 21st Century Fox share they hold. The exchange ratio was set based on a 30-day volume weighted average price of Disney stock. Disney will also assume about $13.7 billion of net debt of 21st Century Fox. The acquisition price implies a total equity value of about $52.4 billion and a total transaction value of about $66.1 billion for the business to be acquired by Disney, which includes consolidated assets along with a number of equity investments.

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.

At the request of the board of directors at both companies, Bob Iger has agreed to continue as chairman and CEO of Disney through the end of calendar year 2021.

Reports also indicated that Comcast Corp., Verizon Communications Inc. and Sony Pictures Entertainment were interested in the myriad Fox assets. Comcast earlier this week announced that it had bowed out of the hunt because it did not see a "strategic fit."

Disney will use the production facilities to enhance its position in Hollywood, as well as the branded direct-to-consumer service it plans to launch in 2019. The addition of Fox's industry-leading regional sports networks would complement ESPN's vast national sports holdings. The regional content at some point figures to become part of the ESPN-branded DTC service, which is set to bow next year.

The addition of the FX Networks and National Geographic Channels serve to diversify Disney's entertainment cable portfolio.

For 21st Century Fox, the deal, if approved, will result in a dramatic reduction in the Murdoch family's media empire. The resultant company will be centered on the FOX (US) broadcast network and TV station business, as well as cable's current ratings leader FOX News Channel (US) and its economic flanker, FOX Business Network (US). FOX Sports 1 (US) and FOX Sports 2 (US) and their national rights also remain in the fold, as well as the company's stake in Big Ten Network.

The deal will likely have to pass heightened regulation muster.

The U.S. Department of Justice has filed a lawsuit to block AT&T Inc.'s purchase of Time Warner Inc. Some media observers believed that legal activity would curtail M&A activity, including the sale of the Fox assets.