Disney buys much of Fox in megamerger that will shake world of entertainment and media

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(Richard Drew/AP)

NEW YORK — The Walt Disney Company, an entertainment firm as sprawling as one of its landmark theme parks, has pulled off one of the largest media mergers in history by acquiring the majority of assets from rival 21st Century Fox.

The announcement resets the Hollywood power grid. Disney, the nation’s largest studio by box office returns and the company behind the Marvel and “Star Wars” franchises, is acquiring Fox, the third-largest studio known for backing some of Hollywood’s most critically acclaimed films, as well as the blockbuster “X-Men” series. It also brings together Fox, owner of FX, National Geographic and “The Simpsons,” with the company behind ESPN and ABC.

Disney will pay $52.4 billion for Fox, which will spin off Fox broadcast networks and the Fox News Channel and Fox Business Channel, leaving them in the hands of Rupert Murdoch, chairman of 21st Century Fox. Robert Iger, the chairman and chief executive of Disney who had been rumored to be considering a run for president, will continue with the combined firm through 2021.

“The acquisition of this stellar collection of businesses from 21st Century Fox reflects the increasing consumer demand for a rich diversity of entertainment experiences that are more compelling, accessible and convenient than ever before,” Iger said in a statement Thursday morning. “We’re excited about this extraordinary opportunity to significantly increase our portfolio of well-loved franchises and branded content to greatly enhance our growing direct-to-consumer offerings.”

“We are extremely proud of all that we have built at 21st Century Fox, and I firmly believe that this combination with Disney will unlock even more value for shareholders as the new Disney continues to set the pace in what is an exciting and dynamic industry,” added Murdoch.

Disney will also acquire Fox’s 30 percent stake in Hulu, a group of U.S. cable stations including FX and National Geographic, several powerhouse international satellite channels such as Star India and Sky Italia, and a host of U.S. regional sports outlets. Disney hopes the beefed-up company will be better equipped to tackle a slew of Silicon Valley giants.

Equally important, the deal will take Murdoch out of much of the scripted television game and all of the film business, ending a Hollywood association that began more than three decades ago when Murdoch paid about $600 million to buy 20th Century Fox from industrialist Marvin Davis and crested as recently as 2014 when Fox led all studios by market share for the first time this century.

Regulators and shareholders must still approve the deal, but analysts do not expect it to face problems. The DOJ is currently suing AT&T to stop its acquisition of Time Warner, noting concerns about the marriage of a distributor and content provider.

Combined, the new Disney could boast as much as $75 billion in revenue, with nearly a third coming from Fox assets.

Fox currently employs an estimated 27,000 people around the world, many of them at the divisions being acquired by Disney.

The deal makes Disney a behemoth of the type entertainment has never seen before and sets the stage for a battle with Silicon Valley titans like Netflix, Apple and Google. The conglomerate is building up scale in the hope of fending off those firms’ forays into the content market; it is also stockpiling content for a new streaming service that it hopes will stem a tide of cord-cutting that has afflicted properties like ESPN.

Disney’s move hints at a further industry consolidation, analysts say, that could see Viacom, CBS, Lionsgate and Sony seek large buyers too, and leave just a few large legacy conglomerates such as Disney-Fox, Comcast Universal and a potential AT&T Time Warner.

For Iger, Thursday’s deal amounts to another feather in an already decorated cap that includes the successful acquisitions of Pixar, Marvel and Lucasfilm.

But Fox will provide the greatest integration challenge yet, with many of the newly acquired company’s divisions overlapping with Disney’s existing operations. And greater scale, while valuable in negotiating traditional distributor deals with cable operators and movie theaters, is no guarantee of direct-to-consumer success.

The news provides a bookend of sorts to a merger in 1995 that also saw Disney combine with a television giant — Capital Cities/ABC — setting off a wave of entertainment-conglomerate consolidation. Coincidentally, it was that deal that brought Iger into the Disney fold; he was the president of Capital Cities/ABC at the time.

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