Wall Street Cheers Disney-Fox Deal as Media Stocks Get Lift From M&A News
Shares of both Disney and 21st Century Fox rose Thursday after they announced their deal for Disney to acquire major assets of Fox, an event that pushed other media stocks up as well.
21st Century Fox shares closed up 6.5% and Disney shares finished the day up 2.75% following news of the $52.4 billion transaction, announced early Thursday.
“Fox is being well-compensated for the businesses it is selling, and Disney will gain advantages from the additional scale it is buying,” Pivotal Research analysts Brian Wieser wrote in a note Thursday.
To investors, one of the attractive features of the Disney-Fox pact is the savings expected from the consolidation: Disney projects around $2 billion in annual cost-savings by 2021 through the integration of the two companies’ businesses. Of course, such “synergies” imply there will be significant layoffs looming.
Under the deal terms, Disney will acquire the 21st Century Fox assets for $28 per share; after it closes, Fox shareholders will own about 25% of Disney.
Other media stocks that got a lift from the Disney-Fox deal news — as Wall Street contemplates potential further M&A — were CBS (up 1.7%), Discovery Communications (1.3%), AMC Networks (0.8%) and Viacom (0.6%).
Shares of Time Warner, which is in the midst of being acquired by AT&T, closed down 0.4%. Another loser in the media sector was Scripps Networks Interactive, which Discovery is acquiring, whose shares closed down 0.15%.
In the deal with 21st Century Fox, Disney is acquiring 20th Century Fox; a cable group that includes FX Networks, National Geographic and more than 300 international channels; and 22 regional sports networks. In addition, Disney will pick up Fox’s 30% stake in Hulu, 50% share of Endemol Shine Group, the Star India satellite service, and Fox’s 39% interest in Euro satellite broadcaster Sky.
The deal excludes Fox Broadcasting, Fox News Channel, Fox Business Network, FS1 and FS2, and Big Ten Network. 21st Century Fox plans to spin those out to investors following close of the asset sale to Disney.
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