In December of last year, Disney and Fox finalized the terms of an agreement that would see Disney purchase the bulk of 21st Century Fox's film and TV empire. More recently, Comcast chose to make an unsolicited bid to compete with Disney; both Fox and Disney have called shareholder meetings on July 10, at which shareholders will vote on the way ahead.
Naturally, that means the companies are now in the process of outlining the terms of the proposal to their shareholders. One shareholder, who inherited stock from his grandparents, has chosen to post a photo of the letter on Reddit. Although the letter is quite technical, it outlines the process the companies aim to follow in order to implement the merger.
- 21st Century Fox would form a new subsidiary, known as "New Fox," which would be responsible for "a portfolio of 21CF's news, sports, and broadcast businesses."
- 21st Century Fox and New Fox would then enter into a "separation agreement," with an organizational restructure to allow this to be implemented effectively.
- Shares and dividends would then be distributed appropriately.
- At this stage, the remainder of 21st Century Fox - which would have retained "all assets and liabilities not transferred to New Fox" - would begin to merge with Disney. Shareholders would exchange their shares in Fox for shares in Disney.
The approach makes perfect sense, and would allow the Disney-Fox merger to proceed with a minimum of disruption. The reference to some sort of organizational restructure will no doubt cause some concerns in the industry; analysts have suggested the merger could ultimately lead to upwards of 5,000-10,000 job losses.
The shareholder votes on July 10 will be crucial to deciding the future of both Disney and Fox. Fox shareholders will have the option of approving the Disney merger, or alternatively of instructing Fox's management to consider the Comcast option. There were initial reports that Fox preferred selling to Disney - they believed this particular merger was more likely to be approved by regulators. But more recent comments have suggested Rupert Murdoch is willing to go with whoever can offer the most. As a result, Disney is reportedly preparing a counter-offer that would actually exceed Comcast's unsolicited bid.
Should the shareholders sign off on the Disney-Fox merger, the proposal will be passed to regulators to make their own decisions. The current regulatory environment is quite an uncertain one; the Department of Justice's intervention in the AT&T/Time Warner merger was unexpected, and has left most analysts wary of making concrete predictions about DoJ decisions. This will definitely be a tense year for the leadership of Disney and Fox.