21st Century Fox Is Restructuring Before The Planned Disney Buyout

If things proceed according to plan, on July 10, 21st Century Fox shareholders will gather in Manhattan to vote on whether or not to accept Disney‘s buyout offer of $52.4 billion in Disney stock.  In order to expedite the process, a letter was sent out to shareholders of both entertainment conglomerates outlining the steps that will need to be taken to hurry things along.

A shareholder who inherited stock in Fox from his grandparents, posted a photo on Reddit, of the letter, which is quite technical, but here are the main bullet points.

The first is:

  • 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.

What this means is that Fox needs to consolidate the properties that Disney will NOT be acquiring, including Fox News and Fox Sports.  These holdings will be set up as a separate subsidiary which will become its own entity.

  • 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.

That leaves the status of New Fox a bit of a mystery.  Current Fox shareholders may still hold stock in New Fox unless they choose to sell.  It’s also possible that another company could acquire New Fox.

As for the planned buyout of the rest of 21st Century Fox, once again, shareholders will vote on July 10, but that is just that– a VOTE.  The merger could be voted down if stock owners don’t approve, in which case Fox would remain its own company.  That could open it up to a potential buyout by another company, like Comcast, which has stated that it might make a bid of $30 billion cash, instead of stocks.  Fox shareholders may consider that a more enticing offer and reject Disney’s proposal in order to accept Comcast’s.  However, since Comcast made its intentions known, Disney has reportedly been preparing a counter offer just in case.

But Comcast’s plan hinges on the AT&T/Time Warner merger which has been delayed by the Department of Justice.  If the DoJ rules against this merger, Comcast said that they will not make the offer to buy Fox.  Do Fox shareholders hold out hope that Comcast MIGHT make their offer or take the sure thing that is Disney’s proposal?

Well, we have just shy of a month to find out what they decide.