The takeover involves the 86-year-old tycoon and his family taking a 4.25% stake in Disney, which gains control of Fox assets including Avatar, X-Men, The Simpsons and Modern Family as well as the FX and National Geographic businesses.
Murdoch will retain control of Fox assets including the profitable, and controversial, Fox News channel.
“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,” said Murdoch, executive chairman of 21st Century Fox.
Disney chief executive Bob Iger has signed a contract extension to continue to run the business until 2021. James Murdoch, the chief executive of 21st Century Fox, has not been named in the new corporate structure but Iger said that discussions are ongoing about a potential role.
“James and I have had lot of conversations about the future of these companies,” said Iger, on a call with analysts. “He has been great throughout this process. He will be integral to helping integrate the companies over a number of months. During that period of time we will continue to discuss whether there is a role for him here or not.”
Disney has said that the deal, which will allow it to bring together X-Men, Fantastic Four and Deadpool with the Marvel universe including Iron Man, Avengers and Captain America it already owns, will make it an entertainment powerhouse to take on rivals such as Netflix.
The transaction also marks a pivotal moment for the Murdoch dynasty with the departure from the business of James, who is also chairman of Sky. The move paves the way for his elder brother, 46-year-old Lachlan to inherit executive control of the Murdoch empire. Lachlan is co-chairman of 21st Century Fox and News Corp, the separately listed business that owns the Murdoch newspaper assets including The Times, The Sun and the New York Post.
The deal will not, for now, impact the proposed takeover by 21st Century Fox of the 61% of Sky it does not own. The Competition and Markets Authority will continue to investigate the deal as a Murdoch-brokered takeover, pending Fox’s Sky stake officially changing hands.
“While 21st Century Fox’s existing plans to acquire Sky remain in place, we expect the current investigation to continue,” said a spokesman for the department of digital, culture, media and sport.
Disney and Fox said that they expect the £11.7bn deal to buy the remaining 61% in Sky will be cleared and completed by June next year.
21st Century Fox said that it intends to spin-off the remaining assets as a separate business, called New Fox, that will include Fox Broadcasting network and stations, Fox News, Fox Business, Fox sports and its regional network of stations in the US.
“Are we retreating, absolutely not,” said Murdoch, speaking on a conference call. “Those who know me know I am a news man with a competitive spirit. Fox News is probably the strongest brand in all of television. We are pivoting at a pivotal moment.”
However, Lachlan Murdoch acknowledged that 21st Century Fox had hoisted the white flag, saying that “sometimes the right decisions are the hardest ones”.
“The New Fox is about returning to our roots as a lean, aggressive, challenger brand,” he added.
Asked whether he intended to merge the New Fox with News Corp, Rupert said: “We haven’t thought about combining with News Corp. If we do it is way ahead in the future.”
Under the terms of the deal, which will cement Disney’s place as the world’s most-powerful entertainment brand, Disney is paying $52.4bn in stock, including $13.7bn in debt – the total value of the deal is $66bn. Fox shareholders will own about 25% of Disney, with the Murdoch’s 17% stake in 21st Century Fox translating to just over 4%.
“We have always made a commitment to deliver more choices for customers; provide great storytelling, objective news, challenging opinion and compelling sports,” said Murdoch. “Through today’s announcements we are proud to recommit to that promise and enable our shareholders to benefit for years to come through ownership of two of the world’s most iconic, relevant, and dynamic media companies.”
Disney said that it expects the deal to complete in 12 to 18 months and will generate $2bn in cost savings.
Fox’s content will help build the attractiveness of the digital TV service it is launching in the US to take on Netflix. Earlier this year, Disney announced it was pulling its films from Netflix US to compete with its own service from 2019. A sport version is also planned for ESPN.
“Our direct to consumer relationship is vital to our media business and our highest priority,” said Iger on the conference call. “This deal is a very important move forward that reflects our strategic vision for the future. [We will] become a more viable competitor to those that our out there.”
Disney will also get Fox’s 30% stake in hulu, taking its control of the on-demand service to 60%.
