Murdoch’s deal of the Century is packed full of strategy and timing.
On 14 December 2017, I wrote ‘Murdoch’s dump is Disney’s Pump’, which talked about the c.$71 billion spin-off and sale of most of the Fox Hollywood assets to Disney.
Today at 12:02 a.m., US Eastern Time, Disney’s acquisition of 21st Century Fox will become effective and Rupert Murdoch will have successfully closed his deal of the Century.
In the blog I wrote that “……savvy dynastical baby-boomers like Lowy and Murdoch would not be monetising a collective ~A$100 billion of assets built with great precision and care over their respective lifetimes, unless they were convinced the proverbial was all but caught in the fan's blast zone.”
The proverbial I was referring to was digital disruption.
Well, when the deal completes today, Murdoch will have successfully pointed the fan away from his and Disney’s assets and the disrupted will become the disruptor.
Murdoch has continually reshaped/realigned the global media landscape by either building competitive edge by combining assets, or as per this deal; re-housing quality entertainment assets with other premium entertainment assets to transfer/create competitive advantage in another entity - complete with a powerhouse of brands, tiles, IP, premium content, experience and ubiquitous physical/digital distribution.
By astutely rehousing like for like assets, he may have also sidestepped future regulation of non-traditional media that no doubt will hit google, facebook and similar non-traditional media providers; and along with Senator Elizabeth Warren he has come out swinging as a key proponent in favour of breaking up google! A bit of fun as well never hurts.
That aside, here is what’s so strategically correct about the deal:
Combination of some of the biggest ever premium entertainment brands – Disney, ABC-Television, Marvel, Pixar, Lucasfilm, 20th Century Fox, FX Networks and National Geographic under one roof.
Combination of Fox and Disney film and TV content and titles, possibly unrivaled in the industry, with a multiplier effect in digital streaming as Murdoch’s share of Hulu hands Disney outright control of the consumer direct streaming service - possibly the biggest digi-jewel in the combined crown.
Hulu is expected to house all content that is not family-friendly Disney content. That will stream on that Disney+, Disney’s wholly owned and soon to be launched streaming service. Disney will now have two controlled bets in that streaming ecosystem. A third streaming service, ESPN+ will continue to cater for sports.
Further multiplier effect in distribution through Disney parks, experiences, products and studio entertainment.
Leadership succession with a return to Hollywood leadership for the Fox Hollywood assets, and with Lachlan and James Murdoch going their separate ways and no longer co-managing the legacy business in the Fox house.
Increased financing capacity for the transferring assets as part of an enlarged Disney.
A downsized and more strategically aligned Fox Corporation (i.e., Fox Broadcasting, Fox News and Fox Sports) to remain under Murdoch Family control with Lachlan Murdoch at the helm.
From Disney’s perspective the deal is said to be earnings accretive with synergies expected to be somewhere in the vicinity of 2.8% of purchase price. Whilst this looks a little low to me, the combined business is gaining growth and competitive advantage in key areas where millennial buy-in is the strongest, so time (and the Disney share price) will tell how good the deal is for Disney shareholders.
From the Murdoch perspective, the deal achieves leadership and family succession along with owner monetisation, plus a rehousing of the Fox entertainment assets in what may now become the strongest Hollywood entertainment ecosystem ever, plus populist/regulatory deflection - all in one deal.
Even Master Yoda can learn from Rupert Murdoch.
NextLevelCorporate is one of a very small number of independent corporate finance industry pioneers with decades of experience delivering conflict-free M&A, Growth Capital and Strategic Corporate Finance Advisory solutions. With a focus on solutions that capture competitive advantage, our sole objective is to help our clients to successfully buy, sell, finance or invest in companies and assets of any size, in and out of Australia.