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Disney's Goliath Content Arm Grows Further as Fox Slims Down to Sports & News

The upcoming situation will see the mega-merger of Twenty-First Century Fox, Inc.'s (FOXA) entertainment assets with The Walt Disney Co. (DIS), resulting in a powerhouse of content creation and distribution. Alongside this, and prompted by a bevy of international regulatory conditions, FOXA must Spinoff its Sports & News segment into Fox Corp. (FOX), which we believe is a takeover target in the long-term for any larger media company looking for more broadcasting exposure.

The Major Post-Situation Players...
The Walt Disney Co. (DIS, post-acquisition of FOXA): The company re-organized its business segments as per its announcement in March 2018, which became effective October 1, 2018.
Media networks – television programming, production and distribution. Consists of Disney, ESPN, Freeform branded domestic cable networks, and a 50% equity investment in A+E Television Networks (A+E), which operates a variety of cable channels including A&E, HISTORY and Lifetime;
Parks, Experiences & Consumer Products – theme parks and resorts, including Walt Disney World Resort in Florida, Disneyland Resort in California, Disneyland Paris, and a 47% interest in Hong Kong Disneyland Resort and 43% interest in Shanghai Disney Resort. A Consumer products business consists of licensing the company’s trade names, characters, visuals, literary and other intellectual properties to various manufacturers, game developers, publishers and retailers throughout the world as well as the sale of branded merchandise;
Studio Entertainment – motion picture production and distribution under the Walt Disney Pictures, Pixar, Marvel, Lucasfilm and Touchstone banners, as well as the development, production and licensing of live entertainment events on Broadway and globally (stage plays);
Direct-to-Consumer & International (DTCI) – Disney and ESPN branded international television networks and international channels. DTC businesses include the ESPN+ streaming service (launched in April 2018), and Disney+ streaming service (which the company plans to launch in late 2019). This segment also includes BAMTech LLC (75% owned since September 25, 2017), which provides streaming technology support services. The company’s equity investments include a 30% interest in Hulu and 21% effective ownership in Vice Group Holdings;

With the acquisition of FOXA, DIS will gain film and television studios, certain cable networks (including FX and Nat Geo), international television businesses, FOXA’s own 30% interest in Hulu, and proceeds from the sale of its 39% interest in Sky Plc to CMCSA (bid price of £17.28 per share of Sky, equating to a total of £11.6bn or $15.1bn), which was completed in October 2018.

Fox Corp. (FOX, Spinoff): This business will consist of Fox News, Fox Business, FS1, FS2, Big Ten Network, The Fox Network (sports programming primetime entertainment) and Fox Television stations (28 broadcast television stations in the US). The company will report in two business segments.
Cable Network Programming – production and licensing of news and sports programming content, distributed primarily through cable television systems, direct broadcast satellite operators, telecommunication companies and online video distributors primarily in the US;
Television – acquires, produces, markets and distributes broadcast network programming nationally under the FOX brand and the operation of 28 full power broadcast television stations in 17 local markets.

The Edge View...
DIS will improve its competitive positioning through wider scale post-FOXA deal;
New segmentation hints at growing focus on DTC, which is the next stage for growth;
ESPN is a potential divestiture candidate;
All approval barricades cleared for FOXA merger, but with conditional divestments in the pipeline;
“New Fox” is a bet on sports and news channels, with Cable Network Programming the growth engine;
Higher advertising revenue may be a concern, though overall leverage is below FOX's peers;
What about the Murdoch Family's involvement in this?