On Dec. 14, 2017, media giant The Walt Disney Company (NYSE:DIS) announced its intention to acquire certain assets from Twenty-First Century Fox (NASDAQ:FOX) (NASDAQ:FOXA) in a deal valued at $52.4 billion. A bidding war ensued, sparked by interest from Disney rival Comcast (NASDAQ:CMCSA). Disney eventually emerged victorious, with a cash and stock bid of $71.3 billion.
Since then, there's been a lot going on behind the scenes as Disney prepares to bring Fox into the fold. Let's look at some of the uncertainties Disney initially faced, and where we are in the process.
Regulatory approval wasn't a given
While Disney did a certain amount of groundwork to ensure that the deal would ultimately be approved, there were no guarantees. The U.S. Department of Justice (DOJ) challenged AT&T's proposed acquisition of Time Warner, though the merger was eventually approved by the courts. Even after that victory, the DOJ is appealing the verdict.
The approvals required to seal the Disney-Fox deal have gradually been rolling in. Disney recently got the go-ahead from regulatory authorities in China, which came without conditions. This was one of the largest and most important markets for which approval was still needed. It was a big win, considering the ongoing trade war between Beijing and Washington.
The House of Mouse received conditional approval from the European Union in early November, which only required the company to sell off some of its European cable channels. Disney promised to sell its interest in the History, H2, Crime & Investigation, Blaze, and Lifetime channels in Europe to address those concerns.
The company received approval earlier this year from U.S. regulators on the condition that it sell the 22 regional sports TV networks that it was gaining from Fox. The bidding is currently underway to decide their eventual owner. A host of big names are in the running for the channels, with e-commerce giant Amazon.com recently entering into the fray. Other first-round bidders include Apollo Global Management, KKR, The Blackstone Group, Sinclair Broadcast Group, and Tegna.
One notable holdout so far is Brazil, which has yet to approve the merger. The country's antitrust regulator said earlier this month that it had concerns that the deal would result in "a significant increase in concentration in the market of sports channels on cable TV and a high probability that Disney could control the market." Disney responded to the report, saying it was "part of the agency's normal pre-merger process. ... We have been and are continuing to work productively with the agency to address any concerns."
The fate of Sky PLC also is in the rearview mirror. Comcast secured the winning bid to acquire the 61% share of the European cable operator not owned by Fox, but not before Fox ran the price up with its own bid. Fox subsequently agreed to sell its 39% stake to Comcast for about $15 billion.
From a financial standpoint, Disney is in a much better position than it was when the deal was approved by shareholders in July. The sale of Sky and the 22 regional sports networks from Fox will significantly defray the cost of the acquisition. Analysts at MoffettNathanson estimate the regional sports networks could be worth as much as $18.6 billion. A bidding war could bring the price even higher.
A final word
While we don't have a concrete date as to when the deal will finally close, the window is shrinking. Disney CEO Bob Iger said on the company's recent earnings conference call, "Last June, we estimated it could take up to 12 months for the transaction to close, but we are increasingly optimistic, it will be meaningfully earlier than that." (Emphasis added by author.)
For its part, Fox is planning to be ready by the beginning of 2019. Peter Rice, president of 21st Century Fox, reportedly told employees in a town hall meeting that the company will be logistically ready to close on Jan. 1.
Seems like it's only a matter of time.