News Disney and Fox come to terms -- announcement soon; huge IP acquisition

Rodan75

Well-Known Member
We still haven't heard the status of that JJ abrams deal. Getting Abrams long term would be a huge win.

Agreed. Wouldn’t be surprised if JJ gets a label...like Touchstone as a release outlet for Bad Robot and a limited green light authority. Which is very non-Disney to do.

I think locking down Seth is crazy important as well. If Fox cancels and Hulu picks up The Orville, I think we know what is happening.
 

bartholomr4

Well-Known Member

This is definitely disappointing. But at least they will be able to close the chapter and move on.

I did a little research on how Disney placed the RSN's on its books. We will have to wait to see the announcement details/specifics, and anything we can gain from the deal once it is finally announced, but these RSN's come with over $5 Billion in debt. Again, Disney may be selling them without the debt, and without trying to figure out all of the tax consequences associated with the sale, the overall value of what Sinclair is getting may include the debt (as of March 31st, 2018 it was $5.153 Billion).

This would make the value to Disney equal to somewhere between $18.5 and $19.25 Billion ($10 Billion from Sinclair, $3.7 Billion for Yankee Yes and $5.1 Billion give or take in reduced debt) . The same March 31st Sec filing, has Value for the RSN's at $21.194 Billion. So if the company is able to sell the debt with the assets, the disappointment will be smaller than the $10 Billion dollar figure we are hearing about today appears to portray.
 

bartholomr4

Well-Known Member
I haven’t seen anything about assumed debt in any releases today. Which does make this look like a pretty good deal for Sinclair.

The agreement is out on SEC.gov

Some highlights include:
1) Sinclair needs to get DOJ and SEC approval (Anti-trust and regulatory) prior to Feb 3, 2020. The deal will close no later than 30 days after these approvals are granted.
2) There is a $864 termination penalty if Sinclair walks away. There is no penalty for Disney if they walk away. There are reasons both can walk away, but they are technical in nature. If Sinclair can’t secure the debt funding it needs, it would have to pay Disney the walk away fee.
3) Based on my read (I am not a lawyer) of the contract, Disney has not been able to audit the records of the RSN’s since its closing in March. So the deal is based on balance sheets from the last two audits June 30th 2017, and 2018, and the unaudited balance sheet from December 31, 2018. Over the next 90 days, the books will be audited and the closing payments will be adjusted based on what they find.
4) Sinclair gets a maximum of $800 Million in working capital (adjusted up or down based on taxes, etc.), so Disney will keep any cash above that amount (On March 31st Disney 10K this around $1.2 Billion).
5) Sinclair will assume the liabilities of the firm based on what was on the books as of December 31st, post the upcoming audit, which includes all leases, short term and long debts, employee pension liabilities, etc.

Sinclair will have to issue a 10K with the SEC listing a post audit Balance Sheet and Financial Statement, so we will know the final payment amounts and reconciliation then.

There also appear to be miniority partners who are funding a portion of the purchase price. Sinclair appears to be paying $9.6 Billion. The minority partners are making up what appears to be an additional $1.0 Billion.

Because the contract gives Sinclair until February of next year to get its approvals, it appears Disney will need to go to the DOJ and request an extension for the sale until that date or 30 Days after the Anti-trust and Regulatory approvals. With Sinclair’s failed attempt to purchase Tribune Media last year due to Anti-trust reasons, I wonder how easy they will receive the requisite approvals.
 

bartholomr4

Well-Known Member
From Today’s earnings release, and Consolidated Income Statement (source SEC.gov)

“As part of the 21CF acquisition, the Company acquired 21CF’s 30% interest in Hulu increasing our ownership to 60%. As a result, the Company began consolidating Hulu and recorded a one-time gain of $4.9 billion from remeasuring our initial 30% interest to its estimated fair value, which was determined based on a discounted cash flow analysis.

On April 15, 2019, Hulu redeemed Warner Media LLC’s (WM) approximate 10% interest in Hulu for approximately $1.4 billion. The redemption was funded via a loan from the Company to Hulu. Pursuant to the redemption agreement, Hulu’s remaining noncontrolling interest holder, NBC Universal (NBCU), may elect to participate in the redemption by contributing its proportionate share of the purchase price to Hulu. NBCU must make this election within 90 days from the transaction date. If NBCU elects to participate, the Company’s interest in Hulu will increase to 67%. If NBCU does not elect to participate, the Company’s interest in Hulu will increase to 70%.

The fair value of investments acquired in the acquisition include $1.2 billion of equity method investments and $0.3 billion of equity investments. Equity method investments primarily consist of a 50% interest in Endemol Shine Group, a global multi-platform content provider and a 30% interest in Tata Sky Limited, a satellite operator in India).

The Company also assumed 21CF commitments totaling $31 billion, of which $22 billion relate to the Regional Sports Networks. These commitments are primarily for sports and entertainment programming rights. In addition, we entered into commitments with New Fox totaling $0.3 billion, primarily for the lease of production facilities and office space. Hulu commitments total $3.4 billion and relate primarily to programming rights.”

  • No mention in the Comcast 10K on their decision to purchase a third of the Time Warner stake. Comcast’s 90 days is up July 15th.
  • The amount of debt being transferred to the RSN’s as part of the sale (other than the sports rights) is $2.7 Billion in long term debt and approximately $500 million in short term debt.
  • Bob Iger mentioned today on the earning’s call that Disney owned 2/3rds of Hulu and Comcast owned 1/3rd, so perhaps they made the purchase and it hasn’t been announced.
 

Quinnmac000

Well-Known Member
From Today’s earnings release, and Consolidated Income Statement (source SEC.gov)

“As part of the 21CF acquisition, the Company acquired 21CF’s 30% interest in Hulu increasing our ownership to 60%. As a result, the Company began consolidating Hulu and recorded a one-time gain of $4.9 billion from remeasuring our initial 30% interest to its estimated fair value, which was determined based on a discounted cash flow analysis.

On April 15, 2019, Hulu redeemed Warner Media LLC’s (WM) approximate 10% interest in Hulu for approximately $1.4 billion. The redemption was funded via a loan from the Company to Hulu. Pursuant to the redemption agreement, Hulu’s remaining noncontrolling interest holder, NBC Universal (NBCU), may elect to participate in the redemption by contributing its proportionate share of the purchase price to Hulu. NBCU must make this election within 90 days from the transaction date. If NBCU elects to participate, the Company’s interest in Hulu will increase to 67%. If NBCU does not elect to participate, the Company’s interest in Hulu will increase to 70%.

The fair value of investments acquired in the acquisition include $1.2 billion of equity method investments and $0.3 billion of equity investments. Equity method investments primarily consist of a 50% interest in Endemol Shine Group, a global multi-platform content provider and a 30% interest in Tata Sky Limited, a satellite operator in India).

The Company also assumed 21CF commitments totaling $31 billion, of which $22 billion relate to the Regional Sports Networks. These commitments are primarily for sports and entertainment programming rights. In addition, we entered into commitments with New Fox totaling $0.3 billion, primarily for the lease of production facilities and office space. Hulu commitments total $3.4 billion and relate primarily to programming rights.”

  • No mention in the Comcast 10K on their decision to purchase a third of the Time Warner stake. Comcast’s 90 days is up July 15th.
  • The amount of debt being transferred to the RSN’s as part of the sale (other than the sports rights) is $2.7 Billion in long term debt and approximately $500 million in short term debt.
  • Bob Iger mentioned today on the earning’s call that Disney owned 2/3rds of Hulu and Comcast owned 1/3rd, so perhaps they made the purchase and it hasn’t been announced.

Based on this, it sounds like the deal was already done.

Hulu, meanwhile, became even more Disney-fied last month when Disney bought out WarnerMedia’s 10% interest. Asked if international expansion or other changes to the loss-making service will be possible so long as Comcast remains a 33% minority partner, Iger expressed some caution. “Any big decisions that are made in terms of investment or expansion would have to be done with their cooperation,” he said. “We both probably share a bullish outlook on Hulu, but we can’t do it on our own.”

Also suggest that Comcast may not be selling as speculated and actually willing to participate in the process.
 

Rodan75

Well-Known Member
Based on this, it sounds like the deal was already done.

Hulu, meanwhile, became even more Disney-fied last month when Disney bought out WarnerMedia’s 10% interest. Asked if international expansion or other changes to the loss-making service will be possible so long as Comcast remains a 33% minority partner, Iger expressed some caution. “Any big decisions that are made in terms of investment or expansion would have to be done with their cooperation,” he said. “We both probably share a bullish outlook on Hulu, but we can’t do it on our own.”

Also suggest that Comcast may not be selling as speculated and actually willing to participate in the process.

Iger implied all scenarios are possible, 70/30, 67/33 and 100/0. It was a strangely open Iger. The last time he was like that he triggered the first ESPN sell off.
 

bartholomr4

Well-Known Member
Iger implied all scenarios are possible, 70/30, 67/33 and 100/0. It was a strangely open Iger. The last time he was like that he triggered the first ESPN sell off.

I agree.... He almost spilled the beans on the next slate of Marvel movies. He talked about how he was such a Marvel fan boy and was excited about what is coming. I thought he was going to give line by line details about his discussions with Brian Roberts, when he talked about the potential deal with Comcast. He really had to pull himself back multiple times. I got the feeling they are horse trading, more than just negotiating on price.

He was almost giddy, but why wouldn't he be, as multiple investments are coming to fruition all at once 1) Marvel end-game yielding over 2 billion in 10 days, 2) Star Wars Land about to open [the talked about riding the Falcon multiple times] 3) the Parks up 15% year over year 4) the Fox deal, the stock price up 20% over the last month..... One can argue he has pulled the inside straight. His shoes will be hard to fill....
 

Quinnmac000

Well-Known Member
Where can we listen to this? I'm intrigued that Disney may end up with all of Hulu sooner rather than later

Douglas Mitchelson
So one for Bob, one for Christine. Bob, for Hulu, does the expansion of your non-Disney+ entertainment content require you to own 100% of Hulu if you want to take that internationally? And so if I ask that right, do you need to own all of Hulu to do Hulu international? And pushing that further, because I imagine you're going to say you don't need to. Disney+ has numerous advantages. You laid those out of the Analyst Day. How do you think about the Hulu opportunity overseas and how that service would be differentiated? And any timing on that? I imagine it will be a couple years before enough content is available. And for Christine, Bob talked about the Fox Film slate coming down to 5 or so films a year ex Fox Searchlight. Fewer films will reduce cost a lot in the Fox Studios side. Does the $2 billion of cost synergies include that sort of bringing down the number of films at Fox? Or should we think about those more as sort of core SG&A and other OpEx-type items?

Robert Iger
Doug, first of all, we're bullish about Hulu for a number of reasons, but mostly because as we see it, it's the best consumer television proposition out there because it offers linear channels that include a lot of live news and sports, in-season stacking of network programming, a lot of great original programming, and then, of course, a lot of library beyond just the network library in season that I suggested. With Comcast as basically a 33% owner, any big decisions that are made as it relates to investment or expansion would have to be done with their cooperation. And again, I think we would probably both share a bullish outlook about Hulu, but we can't do it on our own.
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Timothy Nollen
My question is back on the subject of Hulu, if that's okay. News of AT&T selling out and then some discussion of Comcast considering selling. I just wonder, if you lose any partners, what happens to the content that they are contributing to the platform? Do you still get a lot of that Warner content for a long period of time? Does it fall off? And likewise, if Comcast were to drop off, I'm assuming the answer is they won't do that. But if they were to, what would happen to their content in Hulu?

Robert Iger
Well, obviously Warner has sold their stake to us -- or AT&T Time Warner sold their stake to us. And I can't be specific about what was tied to that, but there were some ongoing relationship as it related to their product including their channels. And as it relates to the other question and maybe going back to the one that was asked earlier, we're 2/3 owner of Hulu. So the big decisions that are made, there's a vote that is to occur. But we're going to be mindful of how that's managed knowing that we have a fiduciary responsibility to the third-party owner, to Comcast, 33%. And I would imagine -- and I think we've publicly confirmed that there have been -- there has been dialogue with Comcast about them possibly divesting their stake. And you can expect that if that were to occur, there probably would be some ongoing relationship as it resulted to programming.

Timothy Nollen
Okay. So even if you have lost AT&T, Warner as a part owner and the possibility of Comcast leaving, it still means you have a lot, if not all of the content that they were providing for some fairly long period of time?
Robert Iger

I'm not going to get more specific than that, so I can't help you at all in terms of your assumptions beyond what I just said.
 

bartholomr4

Well-Known Member
Where can we listen to this? I'm intrigued that Disney may end up with all of Hulu sooner rather than later

If you would actually like to listen to the actual call, you can hear a repeat of it at "thewaltdisneycompany.com" and click on investor relations. There is a link you can click-on to listen to the dialogue....
 

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