Proposed Acquisition of 21st Century Fox by Disney

On December 14, 2017, The Walt Disney Company announced that it would acquire 21st Century Fox for $52.4 billion in stock. Under the terms of the agreement, which is expected to close by Summer 2019, pending regulatory approval, Disney will acquire the Twentieth Century Fox film and TV studios, cable networks such as FX Networks and Fox Sports Regional Networks, stakes in National Geographic Partners, Fox Networks Group, Indian satellite TV group Star India, stakes in Hulu, UK based satellite TV group Sky plc, and other key assets. 21st Century Fox will spin-off Fox News, the Fox Business Network, FS1, FS2, Fox Deportes, the Big Ten Network, the Fox Broadcasting Company, Fox Television Stations, and MyNetworkTV into the "New Fox" company.

2017
On November 6, 2017, CNBC reported that The Walt Disney Company was negotiating a deal with Rupert Murdoch to acquire 21st Century Fox's filmed entertainment, cable entertainment, and direct broadcast satellite divisions, including 20th Century Fox, FX Networks, and National Geographic Partners. The deal would reportedly exclude the Fox Broadcasting Company, 20th Century Fox's studio lot, Fox Television Stations, Fox News, the Fox Business Network, and Fox Sports, which would be spun off into a new, independent company run by the Murdoch family. The deal would include film rights to certain key franchises, including X-Men and Fantastic Four, and the distribution rights to Star Wars: Episode IV – A New Hope – which Disney did not obtain through its respective acquisitions of Marvel Entertainment and Lucasfilm. Talks had stalled for the day without a deal being finalized, but it was reported on November 10 that the prospected deal had yet to be fully abandoned.

On November 16, 2017, it was reported that Comcast (parent company of NBCUniversal, owner of Universal Pictures), Verizon Communications, and Sony (parent company of Sony Pictures Entertainment) had also joined Disney in a bidding war for 21st Century Fox. During a recent shareholders meeting, 21st Century Fox co-chairman Lachlan Murdoch stated that 21st Century Fox was not a "sub-scale" company "finding it difficult to leverage their positions in new and emerging video platforms", but had "the required scale to continue to both execute on our aggressive growth strategy and deliver significant increased returns to shareholders". Because Disney owns the American Broadcasting Company (ABC), Comcast owns the National Broadcasting Company (NBC), and 21st Century Fox owns the Fox Broadcasting Company, a full merger of Fox by either Disney or Comcast would have been illegal under the Federal Communications Commission (FCC)'s rules prohibiting a merger between any of the four major broadcast networks.

On November 28, 2017, while mentioning a rumor that the rumored negotiations between Disney and Fox were progressing at a rapid pace, Mike Fleming Jr. of Deadline Hollywood commented that "given how Disney made the Marvel and Lucasfilm deals under the cone of silence, if this happens we'll probably only know it when it's announced. It is certainly being talked about today." Rumors of a nearing deal continued on December 5, 2017, with additional reports suggesting that the FSN regional sports networks would be included in the sale (assets that would likely be aligned with Disney's ESPN division).

On December 11, 2017, Comcast announced it was dropping its bid on the Fox assets. On December 14, Disney and Fox confirmed the $52.4 billion deal, pending approval from the United States Department of Justice Antitrust Division.

2018
On February 5, CNBC reported that despite the Disney/Fox deal, Comcast might take action to outbid Disney's $52.4 billion offer, once the AT&T–Time Warner merger goes to trial on March 18 in federal court to be cleared through, after the Department of Justice Antitrust Division sued to block the merger on November 20, 2017. Despite this, Fox president Peter Rice stated that he was content with the Disney offer and that the Fox assets were "a great fit for Disney."

On February 27, Comcast made an offer to purchase the British broadcast network Sky plc for about $31 billion (£22.1 billion) with £12.50 a share, a move that some analysts speculated could trigger a bidding war between Fox, Disney, and Comcast for Sky.

On March 5, a non-profit group, Protect Democracy Project Inc, filed a lawsuit against the Donald Trump administration and the United States Department of Justice on the hopes to seek any records of communications between the two groups over Disney's pending acquisition of 21st Century Fox. The lawsuit also seeks "any related antitrust enforcement efforts by the DOJ, to find out whether the president or his administration is improperly interfering with the independence of the DOJ out of favoritism for a political ally." President Donald Trump congratulated Murdoch for the Disney/Fox deal while attacking AT&T's acquisition of Time Warner, particularly over the ownership of CNN, which Trump frequently criticized.

On March 15, Sky plc entered into a confidentiality agreement with both 21st Century Fox and The Walt Disney Company to assess and obtain certain antitrust plus other regulatory approvals, if necessary.

On April 3, 21st Century Fox made two proposals regarding the Sky acquisition: They would either sell Sky News to The Walt Disney Company (which would be a separate transaction from the Disney-Fox merger), or to separate Sky News from Sky plc. On April 12, the Panel on Takeovers and Mergers ruled that Disney must acquire all of Sky within 28 days of fully acquiring 21st Century Fox if Fox's acquisition of Sky isn't completed by the time the merger is done, or if Comcast's counter-offer isn't accepted.

On April 12, Peter Rice revealed that the merger is expected to close by summer 2019.

On April 25, Comcast started a bidding war with 21st Century Fox for the acquisition of Sky plc.

On May 7, it was reported that Comcast spoke to investment banks about topping Disney’s offer to acquire Fox. Shortly afterwards, Bob Iger stated that he was willing to drop Sky plc from the deal to ensure the Fox acquisition.

On May 15, several Fox investors said they would be open to terminate the company's agreement with Disney if Comcast followed through on its plan to launch a rival all-cash bid for $60 billion. Murdoch's family trust controlled 39% of Fox due to shares it held with special voting rights. However, under the company's by-law, those special rights did not apply to a vote on the Disney/Fox deal, when the Murdoch trust only controlled 17% of the vote. That makes it easier for other shareholders to defeat him in the vote, which was expected as early as next month.

On May 16, it was reported that Lachlan Murdoch, rather than James Murdoch, will take charge of the new Fox company.

On May 23, Comcast publicly announced that it was looking into making an all-cash counter-offer for the Fox assets that Disney proposed to acquire.

On May 29, it was reported that Disney was looking into making its own all-cash counter-offer for Fox assets in the event that Comcast went through with their offer. The next day, Disney and Fox announced that they have set their shareholder vote meetings for July 10, though both companies have stated that Fox's meeting could be postponed if Comcast came through with their offer.

Antitrust concerns
The deal is currently under review by the United States Department of Justice Antitrust Division, which has already sued to block a merger between AT&T and Time Warner. This operation, which would be studied for 12 to 18 months, has led to significant amount of antitrust concerns. The deal is a horizontal merger (i.e., in which a company buys up a corporation that produces the same goods and products) as opposed to a vertical merger (i.e., two companies that operate at separate stages of the production process for a specific finished product) like the integrations of AT&T–Time Warner and Comcast–NBC Universal. As such, horizontal mergers are more scrutinized and investigated than vertical mergers, as they effect a more tangible reduction in competition. The Federal Trade Commission (FTC) states in its own website that "The greatest antitrust concern arises with proposed mergers between direct competitors (horizontal mergers)."

As both Disney and 20th Century Fox produce films and TV shows, the deal would reduce the number of major film studios in Hollywood from six to five. Some argued that the operation would still leave many competitors around since Disney may compete with Netflix in the online streaming market in equal conditions with its newly acquired properties. However, it was countered that these arguments do not hold much weight due to Disney's powerful box office and stock market shares, its practices, and its purchase of Fox's many assets, leading to many concerns and criticism among businesses, consumers, and regulators.

News media
Many journalists expressed concerns about Disney's purchase of 21st Century Fox and its effects on the industry in the long run. A film reporter stated that "They’ll have more control over more things, so if they decide they don’t like what you wrote and want to ban you from their screenings, eventually that will mean all of entertainment. For journalists and reporters trying to do their job, it is frightening to see the scope of one company expand in that way and know that your fate is kind of tied up with them." "We’ve seen a pattern in Disney’s behavior. The more power they have, the more they wield it," one entertainment reporter said. A freelance critic and member of the New York Film Critics Circle said that most journalists were troubled by the idea of the Disney–Fox deal:

There are currently six major studios, and then there are all the smaller ones, and the one that I like dealing with the least is Disney. I would compare them to the Vatican in that way. They have their rules, they do things their way, and if you don't like it then take a hike, because they have the product in which there is the most market interest.

As an example, Disney banned the Los Angeles Times on November 3, 2017, from attending press screenings of its films in retaliation for the paper's September 2017 coverage of their political influence in Anaheim, California. On November 7, Disney reversed its decision, after receiving massive protests and condemnation from a number of major publications and writers, including The New York Times, The Boston Globe critic Ty Burr, The Washington Post blogger Alyssa Rosenberg, Disney’s A Wrinkle in Time director Ava DuVernay, and the websites The A.V. Club and Flavorwire, and film critics organizations which threatened to disqualify Disney films from their year-end awards in retaliation, specifically the National Society of Film Critics, Los Angeles Film Critics Association, New York Film Critics Circle, and Boston Society of Film Critics. Jason Bailey, the editor of Flavorwire, thought the way Disney treated the Los Angeles Times was “absolutely chilling” and he fears this will only grow more common once Disney takes over 21st Century Fox:

The idea of a major, multinational conglomerate being that petty and vindictive and really engaging in an act of retribution against an outlet, and against reporters who had nothing to do with the thing that they were angry about, gave some insight into the length they were willing to go against anyone who didn’t toe the Disney company line. It’s very worrisome, and is more worrisome if they’re in control of this much more of the entertainment industry.

One film writer stated that "I personally worry that a studio this big will need the press less and less. I don't think anything drastic will change immediately, but I think it is more important than ever for entertainment reporters to uphold journalistic values. We are not their PR arms, no matter how much they'd like us to be." Another film reporter said "As a critic, I’ve had Disney tell me they don’t want to invite me to [its] film because I didn’t like the last one. It really scares me to watch them get even more power."

Theaters
Unlike most studios, Disney has a reputation for lofty terms and strict conditions being imposed upon theater owners on its films such as Avengers: Age of Ultron and Star Wars: The Last Jedi. For the latter, Disney demanded a 65% cut of the movie's domestic ticket sales (rather than the minimum 55% to 60% cut) along with a four-week hold in each venue and face a 5% penalty to any theater owner who breaks any part of the contract, including taking the film off-screen. If Disney/Fox deal happened in late 2016, Disney's domestic box office in 2017 would have equaled $4.5 billion or 40% market share, a figure no major studio has ever hit. For many, the deal would give Disney the unprecedented market power to be abusive without end.

One distribution studio executive denounced the deal, saying that "If I was an independent mom-and-pop theater, I would just close down; there’s no way to survive. With a 40% market share, how do you negotiate against that?" John Roper, the general manager of the Phoenix Theatre in Fort Nelson, British Columbia said that Disney/Fox had him worried about even stricter rules in the future, stating "It's not good for any type of industry when a company grows that large. Disney holds all the cards, and we have to play by their rules. Smaller cinemas are just left in the dust." Roper decided not to screen Star Wars: The Last Jedi because of Disney's strict conditions of requiring the theater to run the movie four weeks straight and play it four times a day (as opposed to other studios who only requires a minimum two weeks movie run and play it one time a day). Elkader Cinema in Elkader, Iowa opted out the movie for the same reason, with owner Lee Akin stating that "I can't get the entire town in my auditorium in one week's time let alone four."

In Brazil, Disney demanded a 52% cut of Coco's domestic ticket sales (rather than the historical 50% cut) and some theaters (with exceptions like foreign chains such as Cinemark Theatres and Cinépolis) boycotted the film. Coco was shown in 618 screens, against 919 screens that showed Sony Pictures' Jumanji: Welcome to the Jungle.

Cable and satellite industry
American Cable Association (ACA) President and CEO Matthew M. Polka lambasted the deal and called on federal regulators to "fully investigate" the merger. Polka was concerned about his smaller cable constituents having to negotiate multichannel deals with a behemoth that combines Fox's regional sports networks with ESPN and its cadre of collegiate-conference-focused RSNs, as well as the majority stake in Hulu:

The Disney-Fox marriage not only will create one of the world’s largest entertainment conglomerates but will give the combined company control of critical video programming that can be bundled together to harm consumers in local and national markets. In particular, Disney-Fox will become the largest holder of key local and national sports programming rights. It also will gain control of more national cable programming networks, and a significant stake in Hulu — an increasingly popular online distribution service. These assets will be in addition to Disney’s national broadcast network (ABC) and multiple owned and operated ABC television stations. Because the combined company post-transaction could leverage these programming assets to undermine competition to the detriment of consumers, federal agencies must fully investigate the proposed combination to ensure that it neither violates antitrust laws nor is inconsistent with the public interest.

Many European telecommunication companies also expressed concerns about the Disney/Fox deal, considering Sky plc/Sky UK was included in the package, as it serves almost 23 million households across Britain, Ireland, Germany, Austria, and Italy. Disney’s takeover of Sky would be greater than RTL Television, Mediaset, ITV, ProSiebenSat.1 Media, and Vivendi combined, according to Eikon estimates. That could allow Sky to expand into new markets and bid more for sports rights and other content. Some felt that Disney's owned Sky UK would be most damaging to its pay-TV competitors since they have invested in content to cross-sell television with mobile services, in a bid to squeeze more out of customers. A hedge fund with a small stake in Sky has complained that Disney/Fox could cost minority shareholders in the UK satellite broadcaster a hefty premium unless UK regulators intervene.

Dish Network CEO Erik Carlson said that blockbuster mergers like Disney/Fox can severely limit the number of content companies that are providing to their customers. Carlson said on CNBC's Squawk on the Street that "We really take the position that we think about the customer and the customer first."

Entertainment industry
The Writers Guild of America West, the union that represents writers of movies, TV, and other media wrote that:

In the relentless drive to eliminate competition, big business has an insatiable appetite for consolidation. Disney and Fox have spent decades profiting from the oligopolistic control that the six major media conglomerates have exercised over the entertainment industry, often at the expense of the creators who power their television and film operations. Now, this proposed merger of direct competitors will make matters even worse by substantially increasing the market power of a combined Disney-Fox corporation. The antitrust concerns raised by this deal are obvious and significant. The Writers Guild of America West strongly opposes this merger and will work to ensure our nation’s antitrust laws are enforced.

Chairman of Sony Pictures Motion Picture Group Thomas Rothman said that Disney/Fox can be a dangerous proposition: "Consolidation under giant corporate mandates rarely promotes creative risk-taking. And in the long run, it is always a challenge to compete against horizontal monopolistic power."

James Mangold, the director of Fox's Marvel adaptations The Wolverine and the R-rated product Logan, expressed concerns that Disney/Fox would lead to the extinction of certain films not suitable for the Disney brand or be reshuffled in order to accommodate more Disney blockbuster movies, thereby limiting the opportunities for certain filmmakers as well as the consumers. Mangold said that “If they’re actually changing their mandate, if what they’re supposed to do alters, that would be sad to me because it just means less movies.”

At the Critics' Choice Movie Awards on January 11, 2018, producer J. Miles Dale—who accepted the Critics' Choice Movie Award for Best Picture for The Shape of Water—urged Disney "not to mess" with 20th Century Fox's indie studio Fox Searchlight Pictures, saying "they're making the kind of movies that we need to make, we want to make, and people need to see".

Writer Marc Guggenheim, known for his work for the Arrowverse for The CW, said that "As a writer, I'm not a big fan of these big corporate consolidations. I don't think they're necessarily good for writers, directors, producers, and actors. I also, as an American, don't love these big corporate mergers. I don't think they're necessarily good for the country."

The potential acquisition of Fox by Disney caused concern within the entertainment industry that smaller media companies, including Viacom, CBS Corporation, Lionsgate and Metro-Goldwyn-Mayer, would need to consolidate or be sold in order to remain competitive.

On February 13, 2018, TV producer Ryan Murphy, a long-time collaborator of 20th Century Fox Television since 2003, signed a five-year, $300 million agreement with Netflix, a move that is considered to be a big blow to Fox and Disney. Ryan cited the Disney/Fox deal as the main reason for departure, arguing that his freedom under Disney might be severely limited in creating new, risk-taking content.

Politics
President Donald Trump praised both companies for the merger, believing it is best for American jobs. However, not all politicians are pleased with the decision. U.S. Rep. David Cicilline from Rhode Island's 1st district, the ranking Democrat on the House Antitrust Subcommittee, expressed concerns over the transaction. He said in a statement that "Disney's proposed purchase of 21st Century Fox threatens to put control of TV, movie, and news content into the hands of a single media giant. If it's approved, this merger could allow Disney to limit what consumers can watch and increase their cable bills," he said. "Disney will gain more than 300 channels, 22 regional sports networks, control over Hulu, and a significant portion of Roku."

Other critics
Richard Greenfield, the BTIG Research analyst, wrote that the combined Disney and Fox assets would have a 39% theatrical market share:

Disney is already using its box office muscle to bully movie domestic exhibitors, extracting financial terms far beyond their studio peers... Adding Fox, which controls portions of the Marvel universe (X-Men, Deadpool) and the Avatar franchise, would enable Disney to gain unprecedented market power.

In response to the Disney/Fox deal, Analyst Andy Hargreaves of KeyBanc Capital Markets Inc. downgraded Fox's stock from overweight to Sector Weight with no assigned price target. Hargreaves said that although the merger is positive for both companies, it comes with a high antitrust risk, due to Disney's potential share of theatrical revenue, its share of domestic cable assets, its strong position in sports, and its power to already force preferential deals with cable, satellite, and theater owners.

David Balto, an antitrust lawyer and former policy director at the FTC, said the inclusion of regional sports network would give Disney greater leverage with cable and satellite distributors. "Any increase in Disney sports programming will be extremely problematic and will get intense scrutiny".

John Simpson of the activist group Consumer Watchdog said the deal "would give far too much monopolistic power to Disney, which is known for cutthroat, hardball tactics" and "can only mean higher prices and less choice for consumers."

Barton Crockett, a media analyst at B. Riley FBR, said that “Disney is becoming the Wal-Mart of Hollywood: huge and dominant. That’s going to have a big influence up and down the supply chain.”

Ian Bezek, contributor to InvestorPlace, questioned the underlying rationale for the merger, asking why Disney needed to acquire Fox's film production and cable sports business for such a "high price" given Disney's already healthy positions in both businesses:

Put another way, Disney is paying $66 billion, including the assumption of $13 billion in debt, to add more sports channels and film production to its already powerful place in both areas.

Given the problems at ESPN, some would say this is doubling down on a struggling division. In any case, this deal significantly weakens the argument that Disney is a diversified powerhouse, as it will rely much more on just a couple revenue streams for the majority of its profits post-deal.

Assets to be acquired by Disney
Included in the deal are the majority of 21st Century Fox's entertainment, international and regional sports assets. These include:


 * Fox Entertainment Group
 * 20th Century Fox
 * Fox Searchlight Pictures
 * Blue Sky Studios
 * Fox Star Studios
 * Fox Networks Group
 * Fox Sports Networks
 * FX Networks
 * National Geographic Partners (73%)
 * Star TV
 * Hulu (United States) (30% -- Disney already owns 30%, after which it will own 60%)
 * Sky plc (39.14%)
 * Endemol Shine Group (50%)

Assets to be spun off to New Fox
Fox's broadcast, news and sports businesses will not be included in the deal and will be spun off into a new independent company to be owned by current 21st Century Fox shareholders (tentatively known as "New Fox"). They include:


 * Fox Broadcasting Company
 * Fox Television Stations Group
 * Fox News Channel
 * Fox Business Network
 * Fox Sports:
 * Big Ten Network (51% owned in joint venture with Big Ten Conference)
 * Fox Deportes
 * Fox Sports 1
 * Fox Sports 2
 * Fox Soccer Plus
 * Fox College Sports
 * Fox Sports International
 * The 20th Century Fox studio lot (although it will be leased by Disney)