Mega Media Merger: Is the Sky the Limit? What Does the Fox Say?

The Walt Disney Company is in the process of purchasing 21st Century Fox.  At a price tag of $52.4 billion, for the deal to come to fruition, many regulatory hurdles need to be tackled.

One issue is that 21st Century Fox only owns 39% of Sky. Another is that the two companies are not in the same country: Disney is American and Fox is British; each country has different regulatory laws.  And a third is the concern of investors in Sky seeking to protect their stock if the sale goes ahead.

Global private investment firm Polygon co-founder Reade Griffith is one of the many individuals who has so voiced his concern.  Should the rest of Sky not be purchased by 21st Century Fox, it would negatively impact share values.  He also  pointed out  “it can be reasonably assumed that buying the Sky stake is a significant purpose of the Fox merger, given Disney CEO Bob Iger told Bloomberg TV that Sky is a ‘crown jewel’ in Fox’s assets.”

Griffith added:

“The Fox and the Mouse have been more clever than that. They have included the Sky stake into a box full of other attractive Fox assets and tied it up with a bow and ribbon and told the Takeover Panel that Rule 9.1 does not apply and therefore no premium is warranted to minorities.”

Next there are matters of antitrust.  The union which represents media writers – The Writers Guild of American West – said: “the antitrust concerns raised by this deal are obvious and significant…[by]…substantially increasing the market power of a combined Disney-Fox corporation.” It will thus be working to “ensure [America’s] antitrust laws are enforced.”

Price control and consumer options are a concern for the people who use these media outlets.  USC Marshall School of Business Marketing Professor, Gene Del Vecchio, voiced his concern on asking, “Will it give Disney undue power? Power not only in terms of consumer choices and prices, but power for the back-end of their business — theater owners etc.”

There is the worry about the monopoly created if the merger takes place.    Media consultant Mathew Horsman said: “It was always the Murdoch-element and the issue of the Murdoch family trust having controlling influence over the newspapers. That wouldn’t be an issue with Disney.”

The concerns are not just restricted to the Americans; the Brits have their own list of causes for concern.  For example, Tom Watson, Deputy Leader of the Labour Party in the UK said: “It’s important for Disney, a highly respected global media brand, that they do not allow the toxic corporate culture we have seen in the Murdoch empire to contaminate their business and tarnish their reputation.”

A lot needs to happen for this merger to go ahead and there will no doubt be substantial more discussion on the issue over the coming weeks.