S&P Global Ratings placed Walt Disney Co.'s A+ corporate credit rating and the A-1+ short-term rating on CreditWatch with negative implications after the company agreed to acquire a wide range of 21st Century Fox Inc. assets for about $52.4 billion in stock.
The rating agency also revised the CreditWatch implications of its BBB+ corporate credit rating on 21st Century Fox to developing from negative following the deal announcement. Fox was originally placed on CreditWatch with negative implications on Dec. 9, 2016, after the company's announcement that it planned to purchase the remaining 61% of Sky plc that it does not already own.
The Fox transaction will aid Disney's ability to launch direct-to-consumer offerings in the U.S. and abroad and expand its already "robust stable" of franchise properties with additions such as "X-Men," "Fantastic Four" and "Avatar," S&P said Dec. 14. The CreditWatch placement reflects the "uncertainty regarding the final terms and structure of the acquisition, the extent of assets that Disney will acquire, and the pro forma leverage profile after the acquisition," said the agency.
The revised CreditWatch implications on Fox reflect the uncertainty over the regulatory approval and timing of both the Disney and Sky transactions, according to S&P.
The transaction includes 21st Century Fox's movie and TV studios, the FX Networks and National Geographic Partners and its 22 regional sports networks. The agreement, announced Dec. 14, also gives Disney Fox's stake and a controlling interest in streaming service Hulu LLC.
Internationally, the transaction expands 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.
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.
S&P Global Ratings and S&P Global Market Intelligence are owned by S&P Global Inc.