By Jennifer Saba
NEW YORK (Reuters Breakingviews) - The Force could be with a Walt Disney deal for Twenty-First Century Fox. The Magic Kingdom is getting close to buying parts of Rupert Murdoch’s $60 billion empire, according to news reports. Disney would add to its clout with global outlets and cable content. The Murdoch family, meanwhile, may fancy shares in a bigger group. A deal could help with succession problems at both companies, too.
The acquisition would include assets like Fox’s FX cable network, movie studios, and global properties such as Star India and its 39 percent stake in European pay-TV group Sky. All in, the enterprise value of the deal could be more than $60 billion, according to CNBC.
Add Fox’s net debt to its market value, and its current EV is around $76 billion. If the assets of interest to Disney are really worth nearly 80 percent of that, it serves to underscore how heavily discounted Fox stock is at present as compared with the value of its parts.
Disney boss Bob Iger would probably pay largely in stock. So could another mooted rival, Comcast, where Chief Executive Brian Roberts’ clan holds sway through super-voting shares. Getting tangled up in another family-controlled firm, though, might be less appealing to the Murdochs, who hold nearly 40 percent of the voting rights at Fox. Comcast’s cable business also adds antitrust risks that Disney doesn’t have.
The most intriguing aspect of matching Mickey Mouse with Fox relates to succession planning. Disney is searching for a replacement for Iger, who is due to retire in 2019. Meanwhile, the triumvirate at Fox – Rupert and one son, Lachlan, as co-chairmen and James, the other son, as CEO – is potentially fraught. James could land a senior position at Disney, according to the Financial Times, perhaps giving him a chance at succeeding Iger.
Whether James Murdoch would ultimately achieve that is another question. But it would leave a slimmed-down Fox and sister company News Corp to his father and brother. At a time of industry upheaval fueled by Netflix and the like, the Murdochs could even end up ensconced at three media companies.
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