So the rumors were true. Walt Disney (DIS) is buying 21st Century Fox (FOXA) in an all-stock deal valued at $66.1 billion including debt. Disney will get Fox's film and television business, its international television and cable statiosn, and other bits and pieces. The remaining Fox businesses--the Fox Broadcasting network and stations, Fox News Channel, Fox Business Network, FS1, FS2 and Big Ten Network--will be split off from Fox just before the acquisition and spun off to shareholders. (Yes, Barron's is owned by Newscorp and Newscorp shares common ownership with Fox.)
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The market doesn't seem to like the deal much, at least not compared to expectations. Shares of 21st Century Fox have dropped 1.4% to $32.29 at 8:08 a.m. in pre-open trading after sliding 4% to $32.75 yesterday. Walt Disney is little changed at $107.60.
In a note released this morning before the deal was official, Cowen's Doug Creutz and Stephen Glagola panned the deal. They argue that Disney's appears to see the acquisition as a way to compete with Amazon.com (AMZN) and Netflix (NFLX) in streaming video. The problem, as they see it, is that those competitors, as well as new entrants like Alphabet's (GOOG) Google and Apple (APPL), see the business are playing "a long game of loss leadership," which could keep margins under pressure. "In our view, Disney is committing significant capital to the lost cause of protecting video aggregation margins," Creutz and Glagola conclude. "The only winning move is not to play."
The market will be the judge of that.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
