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Disney-Fox Merger Negotiation Deal

On November 8, 1998, on an animation broadcast from the Fox Network, The

Simpsons, known for its predictive forethought, made a prediction. On episode 5 of Season
10 of The Simpsons, a takeover of the 20th Century Fox Studios by the Walt Disney
Company was foretold. On March 20, 2019, amidst a channel dropping campaign lead by
Netflix, the vision was fulfilled.

On March 20, Disney purchased 21st Century Fox; Fox has since become Disney. The sale of
one media conglomerate to another is regarded as the most complex and ambitious of all
time. It is difficult to comprehend it with subtlety and minute details. However, despite all the
uncertainty surrounding the purchase of 21st Century Fox, the new Disney Company has
done well to expand its portfolio and generate more profits, just as in the years before the
purchase.

Before the takeover by Disney, Fox had achieved a considerable level of success in the
animation business. One of the six biggest motion picture studios and the fourth-largest
media conglomerate in the world. Rupert Murdoch bought both the Fox Film Corporation and
the Fox News and the 20thumb C.T. Corporation, Fox 2000, the Fox Family Stations, and the
Fox International Channels. Fox Studios' portfolio included 21st Century Fox and Fox 2000
and 30% of the other holding company's parent, National Geographic Television
Corporation's.

Before the takeover by Disney, Fox was one of the most influential studios in the industry. A
big Hollywood film studio with the fourth-largest media conglomerate, known as the world
over As part of Rupert Murdoch's holding company, Fox 2000 includes the 20th Century
Fox, Blue Sky Studios, Fox News, and F.X. Studios with a 30% stake in Hulu, as well as a
30% stake in the National Geographic, Rupert has the entire 20th Century Fox, Sky Movies,
and F.X. Media, which together possess a controlling interest in Hulu, also.

At the end of November 6, rumours of a possible merger or takeover, it was rumoured that
Fox was to be joining forces with Disney.
Additionally, according to an article, the Murdoch family's offer for $52.4 billion in
properties like Fox News and the Fox Broadcast networks will be forced to be sold off into a
separate independent corporation that has the rights to be controlled by the Murdoch family
as the four existing ABC networks are subject to anti-trust laws and the 52.4 billion price tag
for the former isn't reported.

Up until this point, it has been the most prominent television corporation globally, a minor
player in production. Still, even farther up, the biggest by now is being the producer of most
entertainment. As per the agreement reached in January of 2020, Disney will change the
names of 20th Century Fox and 20th Century Fox Searchlight to the latter and prepare to
phase out Fox Searchlight by this time next year. Some say that the name change was an
attempt to minimise Fox's connection to the disgraced FNC, but that prevented the various
studios and other businesses, which include the physical Fox Broadcasting Building, Fox
Television Stations, and Fox Sports, from breaking away from being disgraced by the name
associated with the rest of the Fox Corporation, which was divided into two new
corporations, 20th Century Fox. The new one was called The Fox Corporation. By bolstering
its library of characters and storylines, the deal also positions Disney to compete with Netflix
and other streaming services as its channel, Disney+, launches later this year.

This merger leaves open the question of what is going on in the remaining entity formerly
independent company until it is completed, including what portion of 21st Century Fox
properties that Disney cannot acquire is housed by the newly formed?

Disney, which also owns the Pixar, Marvel, and Star Wars franchises, will also acquire
Deadpool and Fox-owned Marvel properties such as the X-Men and Fantastic Four,
effectively uniting the Marvel family. Additionally, Disney also owns several former Fox
television networks, including F.X. Networks and National Geographic Partners. Disney
would also acquire Fox's 30% stake in Hulu, giving Disney a commanding 60% stake.

Stakeholders

 Bob Iger
 Rupert Murdoch

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  Brian Roberts
 Comcast Chief
 Disney Chief
 Fox Chief

Terms of the Deal

 When Disney inherited the vast majority of the media and entertainment assets of 21st
Century Fox (or 21CF), it gained ownership of both its film and television production
businesses as well as of its streaming video service and distribution subsidiaries. The
$71.3 billion total acquisition cost consists of $19.8 billion paid in cash, while the
remaining $70.2 billion will be issued as stock. Disney has also acquired $19.2 billion in
debt, bringing the amount to $38.2 billion.

 Fox Corporation also concluded the separation of FOX News Channel, FOX
Broadcasting, Fox Business Network, and the FOX Entertainment and sports cable
stations, all of which have been turned into separate entities, into the new entity called
Fox Networks Group (also known as the FS1, FS2, and Ten networks) (FOXA). Under
the agreement, Disney will receive 74% of 21CF's stock. Fox Corporation will receive the
other 26% as compensation for helping with 21CF's development and growth. For every
single share of 21st Century Fox they owned, shareholders got $1.26 from Fox
Corporation.

 The total pay-out settled upon last summer required shareholders to receive at least 50%
in cash and 50% in Disney shares. This way, the premium paid by shareholders at the end
of the day's low close would be at least $115.27. The price received at the end of the day's
offering must be at least $78.68 to cover Disney's average net equity. shareholders of 21st
Century Fox — Fox's path to Fox Corporation — will own a Pro-forma stake of 17% to
20%

 Due to the lowballing of their offer, the Disney board made a counteroffer to $23 per
share (October 27, 2017, for a $60 enterprise valuation on all of the assets), which was

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 promptly rejected. They ultimately ended up paying around $38.64 per share for a 65%
equity stake in Fox65.

 There is a massive difference in the price valuations between the higher and lower limit,
mainly when selling.
Implications

 The study of Disney stock ended up valued 21st Century Fox's properties at a far higher
price than its own.

 I'm not optimistic about Disney's takeover of Fox, and they paid an enormous amount of
money for it. But it is undeniable that this deal is critical to the company's success in the
long run, and I doubt if the owners will be the ones who profit from it the most. There's
been no specific indication from Disney as to the date that it expects to lower costs, save
for a projection of $2 billion by 2021.

 Most Wall Street and industry experts anticipate overlaps in ads and other channels. The
prediction is that a significant number of jobs will be lost. As a result, Senior people have
left the company so that the casualties would be just a tiny percentage of the total. Still,
with the 200,000 total company headcount, many of those losses will be significant.
There will be many veterans who will be negatively influenced, both in the short and long
term, by the rapid evolution of the entertainment environment.

 In the future, between Disney-Fox and the exits and those conducted by WarnerMedia,
there will be a highly-much sought-after pool of executive talent to choose from.

Art of Negotiation

Commencement: A secrecy

 While meeting at Rupert Murdoch's estate in Bel-Air, Disney chief executive Bob Iger
and Rupert Murdoch chatted casually about the company. However, Rupert did not play

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 an active role. The parties were initially on the same page regarding the developments
they had observed to be highly affecting their respective T.V. and film industries.

 After working with Iger for a while, the Chairman was persuaded that Murdoch was
willing to consider a significant contract that would be very substantial for 21st Century
Fox and Disney.

 A follow-up phone call came a few weeks later. Iger demanded a meeting to talk about
the possibilities of a merger. Ige's hunch had turned out to be correct. Murdoch was
perfectly willing. Exceedingly well-played game

 A few hours after Disney's Chairman and CEO Iger revealed his takeover plans for Fox
on December 14, the deal was done, and the two other top executives emerged before the
sun rose to tell everyone about it. In front of London's St. Paul's Cathedral flanked by
their arms in profile was printed in the press release with Iger and Murdoch on the two-n
shoulder, respectively, standing atop it all smiles.

Blowing the Cover

 But the negotiations seemed to die down a bit until CNBC reported on the talks again,
which brought in a temporary halt, which only resumed shortly after. Comcast
approached Fox to invite them to the merger negotiations, narrowed down to the same
targets that Disney had zeroed in on previously. However, Sony had discreetly inquired
about the likelihood of other bidders to engage in talks to see whether Fox was still
interested in selling. Before 21st Century Fox decided to go forward with an offer, the
investment bank that had earlier put the company on the block envisioned Verizon as a
challenger felt it was gaining credibility.

 However, the Murdochs had their eyes on a potential partnership with Disney. It became
apparent that Disney was pushing on on their deal on 11th hour Fox's new projects,
making it evident that they had little interest in buying Comcast any more. Comcast
announced their withdrawal on December 11. Comcast claims that we never received a

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 sufficient commitment from customers to have made a firm bid, which is why the deal did
not go through.

 In his statement to CNBC, Iger characterised the talks as "smooth and cordial." While
Murdoch, an ancient Luddite by his admission, was nonetheless stunned by the Murdochs
handing over their jewels to the Federal Bureau of Investigation.

Mysterious War Room

 At the shareholders' meeting, one issue was on the table: expansion. As for $35.7 billion,
Disney made the final bid comprised of equal parts of cash and stock — cash and stock
were both being given as opposed and supported by investors. We just had to go in a
briefing for nine minutes to find out that everybody was already aware of everything.
More than three-sevenths of shareholders voted in favour of the proposal due to the
overwhelming number of shareholders. They retained 68% of their voting power.

 The overwhelming majority of those, or 99% of the population, voted in favour of it. Mr
Iger and Mr Murdoch showed not their faces at the annual meeting, nor did anything
about the terms of the agreement to investors because of the value of the transaction and
how long it had been established and negotiated.

 Iger had taken care of his international commitments on his previously planned tour, and
Murdoch wanted to do the same for his responsibilities in California. There was no sign
of Mr Murdoch's sons James Murdoch, who was in charge of the company, or Lachlan,
the Chairman, on the programme.

Interests of Parties

 Since the merger, the corporate name Fox Corporation gained ownership of the Fox
television network, Fox Sports (not Fox, which also owns Fox, MyNetworkTV), local
T.V. stations, the Fox News Channel, with the Fox Business Network, as well as the
sports cable networks Fox and Fox Sports (now Fox Sports 2 and Fox Sports Net).

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 Beginning today, the company's first trading day on the NASDAQ exchange, it opened a
new chapter in its history.

 Disney's overall top management team remains unchanged, as is shown by CEO Bob Iger
and his fellow executives. But four executives from Disney Corporation are moving to
Fox: Peter Rice, Dana Walden, Gary Knell, and John Landgrave, all have significant
holdings in multiple corporation divisions. Alan Horn, the latest success of film releases,
will continue with Fox, who will join as an executive vice president is Emma Watts, and
Nancy Utley, who has previously worked with 20th Street Productions, as well as an
architect of a great run of films for the studio, and 20th Street Pictures. Studio veteran
Stacey Snider, who has been involved in Fox's film activities for years, has revealed that
she will be standing down when the contract is over.

 Lachlan Murdoch is Chairman and chief executive officer of Fox Corporation. After the
acquisition is completed, James Murdoch would likely choose to establish a new focus for
his career by founding an investment fund for his brother. The latter has led the company
for the last few years. James Murdoch, the Chairman of both and CEO of News
Corporation and Rupert's son, will be a significant stockholder in Disney's not-too-distant
future. Now that he has been repositioned to focus on a broader issue, he is anticipated to
maintain a national and international presence even into his old age.

 Without the film, life as we know it today wouldn't exist. After it is all said and out and
done by the American box office, the result would be that the Disney-branded studios will
hold an impressive 35% of the national marketplace. Many other significant advances
have been made in the honours arena as well. At the 91st Academy Awards ceremony last
month, 11 trophies went to 11 different studios: Disney-Fox Searchlight, Fox and
National Geographic. Next in line among the studios was Universal, followed by Focus
Features, which received five total, one from the niche Focus Features sister company.

 In terms of influencing television, the Fox network's remaining with Fox Corp.
maintaining control of the shows, the needle won't travel as far. There is no doubt that
strength with the current providers of the satellite and digital broadcast networks and
those which we raise their capacities in terms of growth and efficiency, thanks to the

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 inclusion of National Geographic. Though Disney's cable portfolio has long been
comprised mainly of ESPN, this time around, the inclusion of both F.X. and Nat Geo
allows for a more diverse business.

 Though regulators outside the United States expressed reservations about the agreement,
they finally approved it after agreeing to allow it under certain conditions. Concerning the
sale of Fox Sports, Disney obtained consent to the merger only because it will free up
valuable spectrum for media rights expansion. The European corporation revealed that it
planned to divest its reality networks, essential, and educational channels, all under the
A+E joint venture.

 As far as films go, in the United States, in other words, in U.S. terms, the presence of two
or more separate entities will cast a much greater shadow. In countries with rigid
restrictions on the number of films produced, it would have greater access in China,
where a limited number of films are allowed. There are only 12 spots for new movies in
China every year where national film screenings are allowed, so it's no surprise that Free
Solo, the breakthrough documentary from National Geographic, will have to be making
only one of them. Other big-time holdings that are being transferred to Disney include
Endemol's movie studio as well as global powerhouses like Star India.

 A consent decree was signed in August last year with Disney and the United States of
America stipulating that The DOJ insists that if the sales of these 22 regional sports
networks fall through, then U.S. authorities will be unable to stop the conglomerate
Disney from completing its planned purchases of Fox assets. Since it controls ESPN,
Disney cannot even exert anti-competitive leverage over the regional sports networks.

 A separate schedule was established on the sales of Disney's and Fox's assets, which gives
them time to sell all of their respective assets earlier than the closing date of the merger.
Due to complaints of reduced from regulatory authorities, Fox's insistence on getting all
its T.V. station acquisitions, it certainly would not have been in their interest to attempt to
purchase the other RSNs. If Comcast were in the role of another sports media force like
The YES Network, it would not have had the RSN rights to allow the proposal. One of
the biggest RSNs in the portfolio, Indeed. The most recently purchased, by the owners of

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 New Yankees and Amazon's Sinclair, through Sinclair Broadcasting, also has a portion of
the portfolio as a piece of the pie. In the other sports league up for purchase, interest is
being seen in purchasing Sinclair Broadcast Group's RSNs, Basketball T.V., and the
BIG3 basketball league, as well as a few other private equity firms, have entered the fray.

 If you look at the entire portfolio as some acquisitions, $3.5 billion seems to be a good
deal for YES. It can only acquire an additional ten per cent of that amount, but it still not
as big as many predicted.
Commentary on the deal

This acquisition provided the opportunity for Disney to combine entertainment and movie
and sports cable networks that are locally focused and independently owned, together with
independent sports broadcasting houses and their ample media assets, which means they will
fold together to form Disney's ESPN.

When it bought Lucasfilm in an aggressive and hugely successful way with many good film
franchises like "Avatar" and "King's Men," Disney is the new owner. It got itself a good tool
with which to develop. Excitable comic book fans are chomping at the bit to see a crossover
between X-Men and Avengers superheroes in the works. Understandably, other businesses
will like to keep ahead of the competition.

On the contrary, it remains to be noticed if having a Fox News in a lot of studios would
improve the profitability of such studios, as it is difficult to gauge if the News Corp. has
infiltrated and affected it with the success of other corporate models, particularly among
large, highly successful ones.

Selling many of Fox's entertainment properties was driven chiefly by fear. Still, there was
also an incentive to capitalise on the advantages as well. Because of the lack of boundaries
between production and distribution of these three companies, each of which has significant
new show budgets for original content, there is the potential for unlimited prosperity and
opportunities, but also the fear of four children of media mogul Rupert Murdoch no longer
being motivated by their almost bottomless pockets, alongside the primary Murdoch's kids
will bail on the company at any moment.

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The real bargaining in this supply chain occurred between content creators and distributors,
who eventually decided who made the most money, and Capital Cities + Disney was a potent
combination:

To begin with, ESPN was well on its way to become the most indispensable cable channel for
viewers, enabling it to demand carriage fees multiples higher than any other channel.
Second, Disney was willing to provide programming to ABC only in time for the FCC to
relax restrictions on broadcast networks making their own content (instead of acquiring it).
Third, Disney created a package within a bundle: distributors had to pay not just for ESPN,
but also for the Disney channel, A&E, Lifetime, and a slew of spinoff channels; any proper
accounting for ESPN's overall contribution to Disney's bottom line should consider the
above-average carriage costs paid by all of Disney's assets.

When it comes to your own negotiating tactics, keep in mind that your BATNA is only
important and powerful during the negotiation process. And the greatest BATNA faces the
realm of "what should have been" after the contract is sealed. There are various case studies
of Bob Iger's negotiating skills during his time at Disney, but his fruitful negotiation to
purchase Fox is the most notable. This was a win-win situation for both Disney and Fox, a
commercial transaction that solidified their long-term partnership. This approach relies on
reaching mutually satisfactory settlements based on the disputants' needs. This is called
Integrative Negotiation.

Disney's motives are obvious; the television business is transforming into a goliath, and there
is currently no David capable of competing with Disney at its own game. Disney has been
looking to “buy either new characters or companies that are capable of making better
characters and great stories” Fox), and the agreement will result in a tangible decrease in the
number of competitors; the deal is likely to be scrutinised with greater zeal. The agreement
will limit the number of major film studios in Hollywood from six to five, raising questions
about the quality of potential production as well as Disney's manipulation of auxiliary
companies, as it would bargain from a position of sheer dominance. Already, Disney is well-
known for imposing egregiously high cuts in its share of movie sales from theatres across the
globe. With their position solidified and their material in high demand, Disney will be able to
impose whatever conditions they see fit on theatres, distributors, stars, and so on. The adage,
“Money corrupts, and utter power corrupts absolutely,” can be trite, but it is supremely
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applicable here. Overall, the Disney-Fox deal is good for Disney, but it might not be good for
other market players. The antitrust regulators' decision will be evaluated, and such a deal will
be permitted only after a lengthy period of review. The results of this integration can only be
speculated on; the real effects can be seen only a few years in the future. Disney's track
record of highly profitable acquisitions demonstrates the case very clearly: M&A is both an
art and a study. When perfected and executed properly, it has the potential to unlock
enormous value for shareholders. You will increase your chances of success in an M&A case
and taking your business to the next stage by efficiently managing your vulnerability within
the legal system, coordinating your negotiating strategies and policy, and effectively
scheduling and managing the M&A operation. Strategic M&A occurs as two firms combine
and it is more strategic for their companies to be combined rather than independent. This is
frequently done to achieve synergies and cost savings, as well as a better competitive
advantage. The moves Iger made to increase his BATNA—and thus his bargaining power—
might have been psychologically soothing, to the point where they served as smart
negotiation techniques that enabled him to sell his business.
References

Latif, M., Jaskani, J. H., Saeed, I., Shah, K., & Azhar, N. (2014). Tactful Acquisitions &
merger of The Walt Disney Company improved its performance, showed by financial &
industry analysis. International Journal of Accounting and Financial Reporting.
Schéré, E. (2018). The Trouble with Mergers Is. UCLA Ent. L. Rev., 25, 133.
Ajay, S., Fink, J., & Hess, P. (2019). Deal Logic Twenty-First Century Fox/Walt Disney.
Sergi, B. S., Owers, J., & Alexander, A. (2019). Valuation changes associated with the
FOX/Disney divestiture transaction. Economics & Sociology, 12(2), 36-47.
Stöhr, A., & Budzinski, O. (2020). Happily ever after?: Vertical and horizontal mergers in the
US media industry. World Competition, 43(1).
Hossain, M. S. (2021). Merger & Acquisitions (M&As) as an important strategic vehicle in
business: Thematic areas, research avenues & possible suggestions. Journal of Economics
and Business, 106004.
Pinheiro, V. C. B. D. (2020). 21 century fox acquisition impacting Disney’s studios (Doctoral
dissertation).
Rebner, S., & Yeganeh, B. (2019). Mindful mergers & acquisitions. OD Practitioner, 51(1),
11-16.

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