Shares of Twenty-First Century Fox (NASDAQ: FOXA) surged last year as the entertainment giant took steps to complete the sale of its entertainment division to Walt Disney (NYSE:DIS) and sold off its stake in Sky to Comcast (NASDAQ:CMCSA). According to data from S&P Global Market Intelligence, the stock finished 2018 up 39%.
As the chart below shows, the stock traded sideways through much of the year, with most of its gains coming in June following a bidding war between Disney and Comcast.
Twenty-First Century Fox came into the year having reached a merger agreement with Disney in December 2017 to sell much of its entertainment programming assets, including its movie studios Twentieth Century Fox, Fox Searchlight, and Fox 2000; television production studios; the networks FX, Fox Sports Regional, FXX; and stakes in National Geographic and several international networks. The deal leaves Fox as primarily a news and sports business.
Given the size of the agreement -- $52 billion in Disney stock at the time of the offer -- and its transformative nature, news around the deal primarily drove Fox shares in 2018 as investors anticipated approval by shareholders and regulators.
After trading sideways through much of the first half of the year, Fox shares got a boost on May 23 when NBC-parent Comcast said it was considering making a "superior" offer for the assets Fox planned to sell to Disney. Fox stock then surged 7.4% on June 13 when it received an unsolicited all-cash bid for the same set of assets at $35 per Fox share, or $65 billion, significantly better than Disney's offer.
Disney responded on June 20 with an offer for $38 a share, or $71 billion, sending Fox stock up another 7.5% to $47.89. At the start of the year, Fox had traded at $34.77, showing why it surged on the competing offers. On July 19, Comcast said it would not raise its bid, paving the way for Disney to complete the acquisition, which was approved by shareholders of both companies on July 27.
In Fox's other bidding war of the year, it lost out to Comcast in a fight over the portion of the British broadcaster Sky that it didn't already own. Fox stock fell in July as Comcast topped its bid. In the end, Fox sold its 39% stake in Sky for about $15 billion at the end of September, which gave Fox shares a modest lift.
Two weeks into the new year, the deal between Disney and Fox still has not closed, though it appears to be nearing completion, as the two companies have gained approval from most of the necessary regulatory agencies around the world. Disney is in the process of soliciting bids for Fox's regional sports networks, as regulators demanded that it divest them.
Fox will be a very different company after the deal is completed, though it will face less competition, removing it from concerns about the arms race in streaming and the decline of traditional cable programming. "New Fox" is expected to have annual revenue of $10 billion and $2.8 billion in EBITDA, which, considering its valuation of $19 billion with the Disney assets removed, looks like a good value.
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