Disney Re-Engages in Talks to Buy 21st Century Fox Assets--2nd Update
December 02 2017 - 2:23PM
Dow Jones News
By Dana Mattioli and Amol Sharma
Walt Disney Co. has re-engaged in discussions with 21st Century
Fox to purchase some of the media giant's assets, and Comcast Corp.
remains in the mix, with deal talks gaining momentum, according to
people familiar with the situation.
The talks center on the Twentieth Century Fox movie and TV
studio, international assets such as Fox's 39% holding in U.K.
satellite TV provider Sky PLC and India's Star TV, along with some
U.S. cable networks. Fox News, the Fox broadcast network and sports
network FS1 aren't expected to be sold in any transaction, the
people said.
Rupert Murdoch and his family, who hold 39% of 21st Century
Fox's voting shares, expect to make a decision by year's end on
whether to pursue a transaction, the people said.
Disney first reached out to 21st Century Fox about a possible
deal several weeks ago, but the talks cooled after the two sides
couldn't agree on price, among other issues, people familiar with
the matter have said.
Once news of those initial talks surfaced, other potential
acquirers began emerging. Comcast, Sony Corp.'s entertainment unit,
and Verizon Communications Inc., are among firms that have
expressed various levels of interest, the people familiar with the
situation say. The extent of discussions with Sony and Verizon is
unclear. A top Verizon executive last week played down the need for
the company to do a big content acquisition.
Disney and Comcast are in active talks with 21st Century Fox. It
is possible the talks could fall through and a deal won't be
reached.
21st Century Fox and Wall Street Journal-parent News Corp share
common ownership.
The assets in play would give a buyer exposure to growth in
international markets as the U.S. pay-TV industry reaches
maturity.
With the Twentieth Century Fox studio, they would also get a
premier Hollywood content factory and strengthen their position as
media consumption shifts to digital platforms.
Also on the table in some of the discussions is Fox's 30% stake
in streaming service Hulu. Disney and Comcast each also own 30% of
the company, so they could consolidate control by buying out Fox's
stake. Fox's regional sports networks could also be sold off, the
people familiar with the situation say.
The Fox deal talks are happening as another big media deal,
AT&T Inc.'s proposed takeover of Time Warner Inc., is headed
for court. The Justice Department has sued to block the
transaction, arguing it will reduce competition and harm consumers.
Some industry observers thought that any major media deal-making
would be on hold as companies wait to see the result of that
litigation.
A sale would mark a significant turn for 21st Century Fox, which
has long been viewed as a potential buyer in the media industry,
not a seller. Media companies across the board are considering new
business models and strategic options as they confront a rapidly
changing landscape, with consumers cutting the cable TV cord, big
programming distributors flexing their muscles, and advertising
revenue growth uncertain.
The remaining elements of Mr. Murdoch's entertainment empire
would be much smaller if an asset sale is completed.
But the entity would likely include some engines of growth. In
the September quarter, results at 21st Century Fox were driven by
the cable network group including Fox News and sports network FS1,
which posted a 9% increase in operating income before depreciation
and amortization. Revenue from monthly pay TV subscription fees
continues to grow, in part because of higher prices.
Meanwhile, operating profit at Twentieth Century Fox fell 18%
from a year earlier, as last year's results were boosted by
licensing deals.
Overall, Fox's profit in the September period rose 4% to $855
million. Revenue rose 7.6% to $7 billion.
Write to Dana Mattioli at dana.mattioli@wsj.com and Amol Sharma
at amol.sharma@wsj.com
(END) Dow Jones Newswires
December 02, 2017 14:08 ET (19:08 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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