Is Disney the Real Winner in a Deal With 21st Century Fox?

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A deal that would see the Walt Disney Company DIS purchase a substantial amount of 21st Century Fox's FOXA assets is all but done, according to multiple reports from sources inside the meeting rooms. Now, as questions about which side comes out on top start to flow, let's dive into the details of the deal and focus on how Disney stands to benefit.

What Disney Gets

The potential Disney and 21st Century Fox deal is said to center around the Twentieth Century Fox television and movie studios. Disney would also acquire FX and the National Geographic Channel, as well as a stake in European TV giant Sky Plc SKYAY .

On top of those assets, Disney would also acquire Fox's 30% stake in Hulu. This move would up Disney's ownership of the streaming television power to 60% . What's more, Disney would also acquire Fox's 22 regional sports networks, which are worth roughly $23 billion, according to MoffettNathanson.

Left out of a potential Disney and 21st Century Fox deal would be the company's flagship Fox News and Fox Business channels, as well as the Fox broadcast network and Fox Sports 1.

Disney's planned acquisition comes at a time when the likes of Amazon AMZN and Netflix NFLX have stormed into the filmed entertainment business and sparked a cord-cutting revolution that has helped shake-up the television and movie business permanently.

The Pros

Disney would be able to leverage 21st Century Fox's television and movie studio businesses in order to help increase and bolster its content offerings. This, in turn, could give Disney greater leverage when it tries to roll out its over the top, direct-to-consumer video streaming service in the next few years.

A stand-alone streaming service that combines all of Disney's and Fox's movies and TV shows stands a much better chance of attracting subscribers than an only Disney platform.

Disney is also set to gain a controlling stake in Hulu, which the company could use as a platform to build from. However, Disney also owns streaming tech firm BAMTech and could relatively easily introduce its own platform and let Hulu standalone as a separate asset.

Furthermore, as Disney's Marvel movie franchise continues to expand, the deal could bring together the Marvel Cinematic Universe with the characters and franchises Fox owns, including the X-Men, Fantastic Four, and Deadpool.

Disney would also gain powerful international cable assets that could help them distribute more of the company's content worldwide, which could eventually lead to the creation of more Disney stores and theme parks.

One of the last major motivating factors for the owner of the struggling ESPN is that the company would collect a plethora of regional sports networks. Fox's 22 city and area-specific sports networks paired with ESPN's assets-which includes stakes in three of the biggest college conference networks-could give the company a stranglehold on sports in many areas.

Disney's move could also improve the company's plan to offer a stand-alone streaming version of ESPN as early as next year. "It would be an embracement of riches for Disney if they get this deal done," Macquarie Capital senior media analyst Tim Nollen said on CNBC .

But this possible domination is where potential antitrust concerns begin to heat up.

The U.S. Department of Justice recently filed an antitrust lawsuit against AT&T T in order to try to block its planned $85.4 billion merger with Time Warner TWX . This case could signal that the DOJ might try to block the expected Disney and 21st Century Fox deal, or at least try to limit its scope.

However, those antitrust concerns are purely speculative for the time being, and they do not seem to have deterred Disney and Fox from trying to reach this massive deal.

Bottom Line

From 21st Century Fox's standpoint, the company and its owner, Rupert Murdoch, seem to be willing to part ways with valuable assets during these changing media times. And speculation surrounding this deal has helped drive up FOXA shares over the last few weeks.

Disney seems to be readying itself to do battle in this new media age by grabbing a bigger stake in everything from sports to movies.

Shares of FOXA sunk over 3.50% on Wednesday, only days after hitting their new 52-week high. Disney's stock price remained little changed.

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Time Warner Inc. (TWX): Free Stock Analysis Report

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Twenty-First Century Fox, Inc. (FOXA): Free Stock Analysis Report

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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.

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