The Walt Disney Company announced its acquisition of 21st Century Fox (21CF) on December 14, 2017. As part of their definitive agreement, Disney was to acquire Fox for $52.4 billion in stock (or 0.2745 Disney shares per 21CF share) and assume 21CF's debt obligations for $23.5 billion, totaling the transaction to approximately $66.1 billion. Due to Federal Communications Commission rules prohibiting a merger of two of the Big Four television networks, 21CF would spin-off certain assets, including the Fox Broadcasting Company, Fox Television Stations, Fox News, Fox Business, and Fox Sports, into a separate publicly-traded company immediately prior to the acquisition.
Disney's CEO Bob Iger came up with the idea of the acquisition after Disney acquired a majority control of BAMTech in 2015 as part of efforts to launch their own streaming service (ultimately named Disney+). Development of the acquisition began as early as November 2017, when Disney met with 21CF's CEO Rupert Murdoch to acquire 21CF's entertainment assets, including the 20th Century Fox film and television studios. Disney formally announced its acquisition of 21CF's entertainment assets the following month. Upon the initial announcement, concerns were raised about the acquisition's potential impact on the entertainment industry, as well as competition with other media companies.
In June 2018, following AT&T's acquisition of Time Warner (subsequently renamed WarnerMedia), Comcast initiated a rival all-cash bid of $65 billion for the targeted assets that Disney intended to purchase. In response, Disney increased its bid to $71.3 billion in cash and stock. After Fox agreed to Disney's amended offer, Comcast withdrew from the deal the following month to focus on its acquisition of Sky Group. The U.S. Justice Department gave antitrust approval to Disney on June 27, on the condition that Disney would divest Fox's regional sports networks. Disney and Fox shareholders approved the deal on July 27, 2018, and following approval from several worldwide regulators, the transaction closed on March 20, 2019.
Apart from the 20th Century Fox film and television studios, Disney also acquired Fox Networks Group, FX Networks, a 73% stake in National Geographic Partners, Indian television broadcaster Star India, and a 30% stake in Hulu. Most remaining assets, including the Fox network, Fox Television Stations, Fox News, Fox Business, Fox Sports 1, Fox Sports 2, Fox Deportes, and the Big Ten Network, were spun-off into Fox Corporation. Other assets such as the Fox Sports Networks and Sky were divested and sold off to Sinclair and Comcast, respectively. Following the acquisition, Disney slowly began phasing out the Fox branding to avoid confusion with Fox Corporation, starting with renaming 20th Century Fox, 20th Century Fox Television and Fox Searchlight Pictures, respectively, to 20th Century Studios, 20th Television and Searchlight Pictures in 2020. Disney also leased the Fox Studio Lot in Century City for seven years, after which 20th Century and other Disney assets formerly owned by Fox relocated to the Walt Disney Studios in Burbank, California.
Background
21st Century Fox was an American media and entertainment company founded by Rupert Murdoch. It was created on June 28, 2013, when the entertainment and media assets of News Corporation were separated into a new company. The company began trading on the NASDAQ and the Australian Securities Exchange on July 1, 2013.
Murdoch served as chairman and CEO, and Chase Carey was president and chief operating officer. In 2014, the company created the roles of co-chairman and co-CEO, which were filled by Lachlan Murdoch and James Murdoch, respectively.
History
Early developments (November 2017–April 2018)
Initial negotiations and strategic rationale (November–December 2017)
On November 6, 2017, CNBC reported 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 (which would be leased to Disney for seven years), Fox Television Stations, Fox News Group, and Fox Sports, which would be spun off into a new independent company run by the Murdoch family.
According to Disney CEO Bob Iger, the idea of purchasing 21st Century Fox's assets came after Disney acquired majority control of the streaming company BAMTech with anticipation to develop its own streaming service, which would eventually launch in November 2019 as Disney+. It was less interested in 21st Century Fox's production capacities and more keen to acquire 21st Century Fox's own film and television libraries to help expand the streaming service's library. Additionally, as 20th Century Fox was the last major studio from the studio era to be acquired when Rupert Murdoch took full control in 1985, its film library was largely intact relative to its peers from that era such as MGM.
The two companies had done business in 2001, when Disney acquired Fox Family Worldwide from the original incarnation of News Corporation, which included the Fox Family Channel (afterwards rebranded to ABC Family and later Freeform), Saban Entertainment, and the international Fox Kids cable networks controlled by Fox Family Worldwide, among other assets.
The deal would also include 20th Century Fox's film rights to certain third-party franchises, such as X-Men, Deadpool, and Fantastic Four, the distribution rights to the original and prequel film trilogies of Star Wars (which were not owned by Marvel Entertainment and Lucasfilm, respectively, when Disney acquired those companies), as well as consolidate ownership of other franchises both share such as Home Alone, and give Disney access to adult animation with the ownership of The Simpsons (which Disney would fully embrace under the Disney moniker) and Family Guy (which in the following years after the acquisition would break the fourth wall by making inside jokes on what they were allowed to do now that they were owned by Disney).
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.
Competing bids and regulatory considerations (November 2017–February 2018)
On November 16, it was reported that Comcast (parent company of NBCUniversal, Xfinity, and Comcast Spectacor), Verizon Communications, and Sony (parent company of Sony Pictures, Sony Music, and Sony Interactive 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 said 21st Century Fox was not in the category of "sub-scale" companies that were "finding it difficult to leverage their positions in new and emerging video platforms", but was instead a company that had "the required scale to continue to both execute on our aggressive growth strategy and deliver significant increased returns to shareholders".
Because Disney owns ABC, Comcast owns NBC, and 21st Century Fox owned the Fox Broadcasting Company, a full acquisition of 21st Century Fox by Disney or Comcast would have been illegal under the Federal Communications Commission (FCC)'s rules prohibiting a merger between any of two of the four major broadcast networks.
On November 28, while mentioning a rumor that the rumored negotiations between Disney and 21st Century Fox were progressing at a rapid pace, Mike Fleming Jr. of Deadline Hollywood commented, "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, with additional reports suggesting 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, Comcast announced it was dropping its bid on the Fox assets. On December 14, Disney confirmed an all-stock transaction worth around $52.4 billion (0.2745 Disney shares per Fox share) to have Fox sell their entertainment assets to Disney, pending approval from the U.S. Department of Justice Antitrust Division.
In February, CNBC reported that, despite the Disney–Fox deal, Comcast might take action to outbid Disney's $52.4 billion offer, if AT&T's acquisition of Time Warner went through. Despite this, Fox President Peter Rice stated he was content with Disney's offer and that the Fox assets were "a great fit for Disney."
Legal challenges and corporate restructuring (March–April 2018)
Early in March, the non-profit group Protect Democracy Project Inc. filed a lawsuit against the U.S. Department of Justice (DOJ) on the hopes to seek any records of communications between the two groups over Disney's pending acquisition of Fox. The lawsuit also sought "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." 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 he frequently criticized due to alleged bias.
On April 12, 2018, Rice revealed the acquisition was expected to close by summer 2019. Beginning in March 2018, a strategic reorganization of the Disney conglomerate saw the creation of two business segments, Disney Parks, Experiences and Products and Walt Disney Direct-to-Consumer & International. Parks & Consumer Products was primarily a merger of Parks & Resorts and Consumer Products & Interactive Media, while Direct-to-Consumer & International took over for Disney International and global sales, distribution, and streaming units from Disney–ABC Television Group, Studio Entertainment, and Disney Digital Network. Given that Iger described it as "strategically positioning our businesses for the future", The New York Times considered the reorganization done in expectation of the 21st Century Fox purchase.
Bidding war between Disney and Comcast (May–July 2018)
Early maneuvering and investor reactions (May 2018)
On May 7, 2018, it was reported that Comcast spoke to investment banks about topping Disney's offer to acquire Fox. Shortly afterwards, Iger stated he was willing to drop Sky plc from the deal to ensure the Fox acquisition.
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, making it easier for other shareholders to defeat him, which was expected as early as next month. Later that month, it was confirmed that Lachlan Murdoch, rather than James Murdoch, would take charge of the new company tentatively known as "New Fox".
The following week, Comcast publicly announced it was looking into making an all-cash counter-offer for the Fox assets that Disney proposed to acquire. Shortly after, it was reported that Disney was looking into making its own all-cash counter-offer for Fox assets if Comcast went through with their offer.
The next day, Disney and Fox announced they had set their shareholder vote meetings for July 10, although both said Fox's meeting could be postponed if Comcast came through with their offer.
Escalating bids and antitrust approvals (June 2018)
On June 12, AT&T was given approval by District Judge Richard J. Leon to acquire Time Warner, easing concerns Comcast had regarding whether government regulators would block their bid for Fox. Consequently, the next day, Comcast mounted an all-cash bid of $65 billion ($35 per share and a 19% premium over Disney's offer) for the 21st Century Fox assets that were set to be acquired by Disney.
On June 18, it was reported that Disney would upgrade its already-existing $52 billion claim to contest Comcast's proposed counter-offer for the Fox assets.
On June 20, Disney and Fox announced they had amended their previous merger agreement, upping Disney's offer to $71.3 billion (a 10% premium over Comcast's $65 billion offer), while also offering shareholders the option of receiving either cash ($38 per share) or stock (between 0.3324 and 0.4063 Disney shares per Fox share). On June 21, Murdoch said in response to Disney's higher offer: "We are extremely proud of the businesses we have built at 21st Century Fox, and firmly believe that this combination with Disney will unlock even more value for shareholders as the new Disney continues to set the pace at a dynamic time for our industry." That still would not have prevented other companies from making a bid, as the deal still needed to be voted on by shareholders.
Iger explained the reasoning behind the bid: "Direct-to-consumer distribution has actually become an even more compelling proposition in the six months since we announced the deal. There has just been not only a tremendous amount of development in that space, but clearly the consumer is voting—loudly."
On June 27, the United States Department of Justice gave antitrust approval to Disney under the condition the company sold Fox's 22 regional sports channels within 90 days of closing, to which the company agreed. The next day, Disney and Fox boards scheduled July 27, 2018 as the day shareholders voted on the sale of Fox's properties to Disney.
Lawsuits and conclusion of the bidding war (July 2018)
On July 9, a Fox shareholder filed a lawsuit to stop the acquisition from Disney, citing the absence of financial projections for Hulu. On the same day, CNBC reported Comcast was looking for companies that could take over Fox's Regional Sports Networks. The shareholder claimed that would've made Comcast's antitrust problems regarding the takeover of Fox assets easier as Comcast was preparing to make a new all cash counter-offer before July 27, 2018.
On July 12, the Department of Justice filed a notice of appeal with the D.C. Circuit to reverse the District Court's approval for AT&T's acquisition of Time Warner (which became WarnerMedia shortly afterward). Analysts said the chances of a victory by the DOJ were small, but would be the "final nail in the coffin for Comcast's Fox chase. This is a clear gift to Disney." On the next day, AT&T CEO Randall L. Stephenson gave an interview with CNBC, about Comcast's bid for Fox: "It probably can't help it. You're in a situation where two entities are bidding for an asset, and this kind of action can obviously influence the outcome of those actions."