Rodan75
Well-Known Member
I agree. I thought the Hearst deal was done.
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News Disney and Fox come to terms -- announcement soon; huge IP acquisition
- Thread starter ohioguy
- Start date
I agree. I thought the Hearst deal was done.
Rodan75
Well-Known Member
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.
Twilight_Roxas
Well-Known Member
Well Fox cancelled The Gifted, and fans are wanting the third season to be picked up by Hulu or Disney+.
I hope Hulu keeps it going.
bartholomr4
Well-Known Member
Disney Nears $10 Billion Sale of Fox Sports Networks to Sinclair
Disney has reached a deal to sell 21 Fox regional sports networks to Sinclair for about $10 billion, according to the Wall Street Journal.variety.com
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.
Rodan75
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.
bartholomr4
Well-Known Member
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
Or find another buyer..... I am sure the DOJ would have a say in what ever happens.
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.”
“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
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
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
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
bartholomr4
Well-Known Member
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....
AnotherDayAnotherDollar
Well-Known Member
That pretty much confirms how bad it is that Hulu has joint ownership. They can't do a lot of things with it.
I also disagree with what you said about Comcast. Sherman's report is that the companies are talking and Comcast is considering selling. Iger and Roberts have both confirmed that. Sherman himself stated nothing may happen.
When 2 companies are talking like this it's just a matter of money. Like I said, I think Comcast will be asking for 6-7B for their 30% (assuming they don't get the extra 3%). Any Marvel rights are a non issue and would just be cherry on top of such a preimum.
Speaking of that, he was very open about NFL Sunday ticket too. Surprisingly. It's clear they are talking to the NFL and seeing if they can get something. That would be a huge coup.
Lol yeah dude almost said that. He pretty much confirmed a lot of what we know and see online is true. And he almost said what was going on in Marvel Land at Disneyland. Pretty much confirmed a 2nd Disney Park in Shanghai and kinda hinted at a 2nd Disneyland in China. Wish I could buy him some drinks today and get him to spill all the beans haha. One of the analysts saw that and tried to push him to get him to spill more and he was like, "I'm not saying anything else, you can go on with your assumptions"
Why do you think they are horse trading though? What would that be? I'm thinking the issue here is price more than anything.
bartholomr4
Well-Known Member
Why do you think they are horse trading though? What would that be? I'm thinking the issue here is price more than anything.
[/QUOTE]
I think Rodan75 alluded to the time Iger was this loose in a call, is when the ESPN troubles started to mount. If I remember correctly (Rodan75 please chime in here) Iger was communicating what was happening without actually saying it in detail. He was wanting to notify the Market about what was happening and sending signals about what he wanted.... Being a student of Game Theory, I think yesterday Bob was sending signals to the market and to Brian Roberts.
In negotiations training, they trained me to figure out your "BATNA" before you start to negotiate. BATNA = Best Alternative to No Agreement, or where you walk away. If you can negotiate something better then the BATNA, you should do the deal. I am thinking both men have established their BATNA, and are working to send signals to each other to move to some place in between.
Lets say you are right in your estimate of $6-7 billion for Comcast. That price would be way above what the market expects(This morning on CNBC, they had 3 analysts on and asked each what value to put on the 30% of Hulu, all three were between $4.5 and $5 Billion). To get to that price, Bob either has to disappoint the analysts, Talk Brian Roberts down, or somehow extract some concessions in the payout for NBCU content. If I am Bob, I am looking at my book to see if there are things that Brian Roberts wants, which I have, which I know are not strategic and I am putting them on the table. I am also looking at things Brian has, which he may not want, which I can use to justify paying the higher price.
To that end, there are 21CF assets which are not strategic, which will likely get shut down. Fox Annimation, Blue Sky, Endimol Shine, etc are either going to be shut-down, absorbed, or sold. The company just wrote off its investment in Vice, because I think, it has become a distraction. At this level, Bob wants Hulu, and Brian knows he does. Brian is in huge debt, and Hulu is going to force Comcast to cough up 200 to 300 million a quarter. What better time is there to trade away these assets?
Negotiations at this level is an art. There are intermediaries, accountants and lawyers everywhere. Brian Robert stepped in and took Sky away from Iger, and made him pay more for the remaining assets. Iger forced Roberts to pay almost twice the highest estimate for Sky in the 3 bid auction.... It is probably safe to say there is no love lost between these two.... So anything is possible. Both men have great people to advise them on reading the signals, getting to the deal. I wouldn't be surprised if they announce an all cash deal tomorrow at the price you suggest, but also would lean more toward that price, plus or minus some sweeteners. Just my opinion - Gut feel. And opinions are like elbows... Most people have more than one of them.
[/QUOTE]
I think Rodan75 alluded to the time Iger was this loose in a call, is when the ESPN troubles started to mount. If I remember correctly (Rodan75 please chime in here) Iger was communicating what was happening without actually saying it in detail. He was wanting to notify the Market about what was happening and sending signals about what he wanted.... Being a student of Game Theory, I think yesterday Bob was sending signals to the market and to Brian Roberts.
In negotiations training, they trained me to figure out your "BATNA" before you start to negotiate. BATNA = Best Alternative to No Agreement, or where you walk away. If you can negotiate something better then the BATNA, you should do the deal. I am thinking both men have established their BATNA, and are working to send signals to each other to move to some place in between.
Lets say you are right in your estimate of $6-7 billion for Comcast. That price would be way above what the market expects(This morning on CNBC, they had 3 analysts on and asked each what value to put on the 30% of Hulu, all three were between $4.5 and $5 Billion). To get to that price, Bob either has to disappoint the analysts, Talk Brian Roberts down, or somehow extract some concessions in the payout for NBCU content. If I am Bob, I am looking at my book to see if there are things that Brian Roberts wants, which I have, which I know are not strategic and I am putting them on the table. I am also looking at things Brian has, which he may not want, which I can use to justify paying the higher price.
To that end, there are 21CF assets which are not strategic, which will likely get shut down. Fox Annimation, Blue Sky, Endimol Shine, etc are either going to be shut-down, absorbed, or sold. The company just wrote off its investment in Vice, because I think, it has become a distraction. At this level, Bob wants Hulu, and Brian knows he does. Brian is in huge debt, and Hulu is going to force Comcast to cough up 200 to 300 million a quarter. What better time is there to trade away these assets?
Negotiations at this level is an art. There are intermediaries, accountants and lawyers everywhere. Brian Robert stepped in and took Sky away from Iger, and made him pay more for the remaining assets. Iger forced Roberts to pay almost twice the highest estimate for Sky in the 3 bid auction.... It is probably safe to say there is no love lost between these two.... So anything is possible. Both men have great people to advise them on reading the signals, getting to the deal. I wouldn't be surprised if they announce an all cash deal tomorrow at the price you suggest, but also would lean more toward that price, plus or minus some sweeteners. Just my opinion - Gut feel. And opinions are like elbows... Most people have more than one of them.
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