Here's why Disney wants to buy Murdoch’s Fox and Sky
When news broke last month that Walt Disney was in talks to buy a large part of 21st Century Fox, the first question many investors had was, why are the Murdochs selling? Then came the second: Why is Disney buying?
The $50bn (€42.4m) deal, which could be announced this week, would mark a significant turning point in the empire-building career of Fox’s founder and executive chairman, 86-year-old Rupert Murdoch.
It would also be a defining moment for Disney and its chief executive officer Robert Iger. Mr Iger has built a reputation over the past 12 years for making bold bets, including the $7.4bn he paid for Pixar animation just months after he became CEO. But this would be much bigger, giving the home of Mickey Mouse and Princess Elsa, the 20th Century Fox film studio, the FX network, 39% of Sky Plc TV service and other assets. It’s just the kind of consolidation media investors have said was long overdue, particularly in film.
“There’s a lot of synergies in doing this, particularly in global distribution,” said Mario Gabelli, of Gamco Investors. “If I’m Disney, I love the distribution globally, India, satellites in Italy, Germany, England. This is good stuff,” he said.
Disney could shave as much as $500m annually in costs by combining businesses, according to Alan Gould, an analyst with Rosenblatt Securities. Half of that would come from the studio side, where Disney could close and sell the Fox lot in Los Angeles. The timing is opportune, he said, because other potential bidders for Fox, including Verizon, may be hesitant to do a big deal given AT&T’s current fight with the US Justice Department over its proposed $85.4bn acquisition of Time Warner. Comcast said it considered a Fox deal, but never made an offer.
Acquiring the Fox assets fits two of Mr Iger’s big-picture initiatives. One is to bulk up on content, particularly franchises beloved by filmgoers all over the world.
Acquisitions he’s made in the past, such as Lucasfilm and Marvel Entertainment, have allowed Disney to dominate the box office for the past two years. The Fox studio would give Disney more such franchises, including Avatar, Planet of the Apes and the X-Men comic book characters.
At Disney, Mr Iger scaled back film releases, focusing on a handful of key brands.
His strategy with the Fox assets could be very similar, using the 20th Century Fox label for some of the more edgy movies, for example.
They have the capital and scale and distribution power that Fox is lacking, said Hal Vogel, an analyst and author of Entertainment Industry Economics: A Guide for Financial Analysis.
Bloomberg
