FOXA Details

Walt Disney Company (NYSE: DIS) and Twenty-First Century Fox, Inc. (NASDAQ: FOXA) are locked in a definitive agreement under which Disney is acquiring 21^st Century Fox, including the Twentieth Century Fox Film and Television studios, along with cable and international TV businesses, for about $52.4 billion in stock (subject to adjustment).

It has also been indicated that 21^st Century Fox will separate the Fox Broadcasting network and stations, Fox News Channel, Fox Business Network, FS1, FS2 and Big Ten Network into a newly listed company, prior to the acquisition. FOXA shareholders will receive 0.2745 Disney shares for each 21^st Century Fox share they hold (subject to adjustment for certain tax liabilities) and Disney will also assume approximately $13.7 billion of net debt of 21^st Century Fox. The transaction is said to imply a total equity value of approximately $52.4 billion and a total transaction value of approximately $66.1 billion for the business under acquisition. Disney will issue about 515 million new shares to 21^st Century Fox shareholders, and this represents approximately a 25% stake in Disney on a pro forma basis. Under the deal, Disney will also take on about $13.7 billion of FOXA’s debt.

The above stated acquisition will provide Disney an opportunity to create more appealing content and deliver a better entertainment experience while having more direct relationships with consumers around the world. Further, Disney expects the deal to be accretive in the second year after deal closing (before purchase price accounting), including some synergies. The company also expects to realize $2bn in cost synergies by 2021. Relative to the size of the deal, cost synergies look quite high.

FOXA stock is up 25% in last one year, and can be now considered for taking profits while we have maintained for an exposure to DIS. We give a “Sell” recommendation on FOXA at the current price of $34.99


FOXA Daily Chart (Source: Thomson Reuters)

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