Disney's Fubo Deal & the Start of M&A Madness
I’ve written extensively about $Walt Disney(DIS)$ ’s plans to bundle Disney+, Hulu, and ESPN to make a new streaming bundle in 2025. I think that could also include more content than we see today like a potential deal to include Fox’s sports programming on ESPN streaming, which would be compelling competition to $Netflix(NFLX)$ .
What Bob Iger has done is create a clear streaming strategy on the scale side of the Smiling Curve. But this streaming strategy doesn’t address what happens to legacy assets, non-core assets, or how to squeeze value from over-the-top cable. Until this week.
Disney announced a plan to trade its Hulu+ Live TV asset for a 70% stake in $fuboTV Inc.(FUBO)$ to create the #2 vMVPD (virtual multichannel video programming distribution) in the U.S. Investors were, unsurprisingly, pleased.
Instead of struggling to survive, Fubo could have a solid business with 6.2 million subscribers and a deal to distribute Disney’s content to boot.
This continues several moves to simplify Disney’s business and unlock significant value. Just look at three deals over the last couple of years that unlocked about $7.5 billion in value.
Penn Deal: Disney agreed to a sports betting deal with Penn Entertainment, including $1.5 billion in payments to Disney over 10 years and $500 million in warrants for Penn stock.
India Deal: Disney traded its Indian streaming business for a 36.84% stake in a joint venture between Reliance Industries, Viacom18, and Disney. The stake was estimated to be worth about $3 billion.
Fubo Deal: Traded Hulu + Live TV for a 70% stake in Fubo, creating $2.5 billion in value.
That’s value from content space and streaming assets with little to no value within Disney. Love him or hate him, Iger is better at this than anyone in Hollywood.
The Start of M&A Madness?
The timing of this deal was interesting because it comes just weeks before a new administration takes over in Washington DC. FTC Chair Lina Kahn has been notoriously anti mergers and acquisitions during her tenure, which essentially froze the M&A market on Wall Street.
Is that about to change?
In Hollywood, a shift would be welcomed. Peacock, Paramount+, and Max are all struggling to make money and likely need to merge to stay afloat as streaming options. Warner Bros. Discovery has said it’s open for business and Comcast is making deals too. Expect fireworks in 2025.
Tech would love to see more M&A, giving them the ability to acquire both technology and talent, which drive the Silicon Valley ecosystem.
Then there’s industrial America, which would benefit from both more scale and a lower cost of capital that scale can often bring.
I think M&A will be a theme in 2025 as executives see how far they can push to expand their businesses. Disney may have just gotten the ball rolling.
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