Posted: September 4th, 2022

MNCs cross listed financing

 

Choose an MNC (NY Stock Exchange listed) which has gone through international stock market financing or international public debt market financing in the past 5 years, conduct a comprehensive analysis of the decision-making rationale and provide an in-depth discussion about the related financial/business environment. 

THE MOST IMPORTANT POINTS INCLUDE IN THE PAPER:

 Rationales, impacts and critiques should be the major directions of your research 

FOR REFERENCE:

One research paper has already been uploaded

So, Select any other MNC for the paper but not an “Alibaba” and Disney- which I attached 

NOTE: Don’t choose these MNCs

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Final Project

The Walt Disney and 21st Century Fox Merger-Acquisition

Chetali Goel

Trinity Western University

MBA 680B

Dr. Liping Zhang

30th September, 2021

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The Walt Disney and 21st Century Fox Merger-Acquisition

Introduction

To begin with, foreign direct investments like mergers and acquisitions are turning out to

be definitely significant for some organizations, which focus to acquire monetary advantages

from these activities. Also, the primary motivation behind M&A exchanges is to make a higher

investor esteem in a mix of two organizations contrasted with a solitary firm.

Prominently, for a quick evolving area as media industry, union is becoming essential for

organizations not just due to their ability to acquire power on the lookout, yet in addition as a

result of their craving to rapidly react to the high rivalry of real time and online administrations

like Netflix or Amazon Prime. The client interest inside the business is moving fundamentally to

digitalization, driving media outlets to advance its administrations and conform to the quick

evolving conditions.

Industry Overview

According to a report published by International Trade Administration (2020), “The U.S.

Media and Entertainment (M&E) industry is the largest in the world at $660 billion (of the $2

trillion global market) – enduring an estimated $53B or 7.3% decline due to the pandemic” (para.

3). Also, the same report claimed that the industry’s market size is esteemed at $735 billion and

incorporates TV projects and ads, streaming substance, music and sound accounts, broadcast,

films, radio, book distributing, computer games, and auxiliary administrations and merchandise.

Another intriguing fact found is the way that across various age bunches the customers

are streaming like never before previously and are normally utilizing cell phones and tablets for

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it. These days, US consumers pay about $2 billion month to month for membership video

administrations. Simultaneously endorsers that devour pay-TV report disappointment with the

help they use and 70% of them guarantee they do not get sufficient incentive for cash they pay

for it.

However, a report published by Deloitte (2019) reports, the expansion of interests in

unique substance creation by steaming organizations as a reaction response to content reviews by

media organizations who are the first substance creators. For example, Disney organization is

killing its films from Netflix and introduced its own web-based feature Disney+ in 2019. In this

way, such media streaming organizations as Amazon and Prime and Netflix are putting more in

their unique substance creation (pp. 3-4).

Furthermore, Media and Entertainment industry will continue to reshape in the aftereffect

of different consolidations and acquisitions, while media organizations attempt to broaden their

substance libraries, content’s quality, its conveyance, and worth conveying. Massive

consolidations will diminish the quantity of huge name organizations that have a more

noteworthy portion of TV projects and films, possibly broadening their substance libraries

(Deloitte, 2019, pp. 6-8).

Company Overview

The Walt Disney Company

The Disney Company is an internationally expanded organization in the media and

entertainment industry that works in 5 significant areas: Media; Parks, Consumer Products;

Studio Entertainment; Disney Interactive. The organization was set up in 1923 by siblings Walt

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Disney and Roy O. Disney and these days, its central command are set in the US, California

(Miller, 2019).

Moreover, according to Navarro (2021), Disney’s yearly income in the Fiscal Year 201

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summed up to $59.4 billion, where the significant piece of $45 billion have been produced in the

US and Canada. As per the reports, media organizations and parks involved a huge piece of

Disney’s absolute income at $24,5 billion and $20,3 billion, individually in 2018 (para. 2).

21st Century Fox

Twenty-First Century Fox Inc. was a worldwide broad communications company

established by Rupert Murdoch in 1980 and was situated in New York City, USA. The

organization claims 28 full force broadcast TV channels in the U.S. which disperse amusement,

sports and other substance, and in general produce right around 1,000 hours of nearby news

consistently (Cassell, 2021, paras. 2-3).

Also, 21st Century Fox had been the fourth biggest media organization in the US until it

was bought by Disney in 2019. The organization’s resources included the Fox Entertainment

Group, the Fox telecom company, and a huge stake in National Geographic Partners and

different resources including some unfamiliar stations like the conspicuous Indian TV slot

administrator Star India (Cassell, 2021, paras. 8-9).

In a report published by Fortune (2021), in July, 2018 21st Century Fox investors settled

on an official choice to offer its resources for the Walt Disney Company for $71.3 billion and this

arrangement covered a large portion of the organization’s diversion resources. Disney’s obtaining

of 21st Century Fox was done on March 20, 2019 after which the organization’s excess resources

were appropriated between the branches of Disney.

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Deal Rationale

Disney as an organization is tremendous in contrast with 21st Century Fox. Considering

when the arrangement was at first reported back in 2017, Disney’s market capitalization itself

was more than threefold than that of Fox. Also, Disney around then had 195,000 full-time

representatives, while Fox had 21,700, which is fundamentally a 9:1 proportion. As per the

information mentioned, it is not an unexpected move that Disney equipped the fourth biggest

media monster in the US.

Neal (2020) explained the merger acquisition between the two companies and stated,

approximately $71 billion, incorporating $35.7 billion in real money and almost $35 billion in

Disney Common Stock were paid to the previous holders of 21st Century Fox Common Stock in

the consequence of the consolidation. Shares of 21st Century Fox Common Stock were traded

for 0.4517 portions of Disney Common Stock. Approximately $19.8 billion of money and $19.2

billion of obligation of 21st Century Fox were gained by Disney. The procurement is expected to

drive up Disney’s Earnings Per Share (EPS) before the impact of procurement representing the

second financial year after the end of the exchange, and to yield essentially $2 billion in cost

cooperative energies by 2021 from activities executed by the mix of organizations.

Also, Disney confronted rivalry from Comcast who attempted to outbid Disney and

assume control over the arrangement in 2018. That anyway didn’t come to occur as Disney then

close by 21st Century Fox, raised their bid to 10% premium more than Comcast’s that was $65

billion, taking it leap from $54 billion to $71 billion. 21st Century Fox additionally observed

Disney to be more appealing purchaser of their resources and hence they stick to Disney from the

start despite the fact that Comcast was likewise an excited bidder. The last procurement cost was

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likewise reached by shared assent of the two organizations, beating the proposal of Comcast for

lucidity.

Reasons stated by Disney to acquire Fox

Sergi et al., (2019) suggests the below mentioned reasons,

Imbalance popular and supply of content possessed by

Disney.

Disney delivers simply a small bunch of element films a year, which doesn’t give a hearty

pipeline to its real time feature going ahead. Purchasing the Fox studio would have given it a lot

of limit and a bigger library of content with which to seed the help.

Increased rivalry in the business.

The possibility of procurement was likewise spurred by the very powers that have started

a flood of solidification in the American media industry, including arrangements, for example,

AT&T’s $85 billion consolidation with Time Warner and Discovery’s $12 billion obtaining of

Scripps Networks Interactive. As tech goliaths get into content and conveyance with their

unmatched assets, media forces to be reckoned with are thinking that it is smarter to cooperate.

This is about expanded functional cooperative energy of the two organizations cooperating, than

working independently.

Creating an incentive for customers and holding them.

This procurement would build Disney’s substance inventory and could carry more worth

to its web-based features and subsequently to their purchasers. A normal buyer today has a lot of

alternatives for media utilizations, going from YouTube to Netflix and Amazon Prime. Holding

the buyer base has turned into a prominent target for media organizations now. This is one more

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justification for why Disney gained 21st Century Fox, as 21st Century Fox is notable for

delivering films and numerous different substance under a few unique flags, for example,

twentieth Century Fox, Fox Searchlight, Fox 2000 and so forth, which all will go under Disney’s

control after the obtaining.

Gaining control of possibly productive Intellectual Property Rights.

Fox possessed many component films, and especially the privileges of the public most

loved characters in those movies. As these dream/activity films bring in such incredible cash,

Disney securing rights to this IP can bring about a lot greater potential for income later on, if

Disney chooses to make fresher motion pictures with these characters. Disney as of now

possesses Marvel Studios, and Fox procurement will add X-Men, Fantastic 4 and numerous other

characters’ privileges to Disney.

Reasons stated by Fox to settle down

Sergi et al., (2019) suggests the below mentioned reasons,

Transforming Media industry.

The media business is getting and that’s only the tip of the iceberg and more conveyance

driven. With real time features like Netflix and Amazon Prime in presence, giving substance to

the buyer in their home itself, Fox has basically left with their substance with them for simple

loaning purposes. Disney anyway had plans for carrying out their own web-based feature. This

union was a greater amount of a mechanical interest and obviously is the motivation behind why

Fox went into the agreement.

Disney’s market reputation.

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Coexisting with Disney not exclusively would have given a stage to their all around

claimed content to be conveyed to the purchasers according to contemporary interest, yet

Disney’s standing with their motion pictures (under various flags, for example, Marvel, Pixar and

so on) likewise would have added to the worth of the solidification.

Fox proprietors get a major offer in Disney.

The procurement bargain offered Fox investors – which incorporate the Murdoch family

(the proprietors of Fox organization) – a generally 25% stake in Disney. In case Disney’s

interpretation of real time features was to succeed, it would make more incentive for the

proprietors added to the deal’s cost.

Common objectives.

Both the media goliaths were attempting to rival the web-based features and in this

manner had procured some stake in Hulu also. Thinking about the shared objectives,

combination was not an impractical notion. Likewise, their stakes in Hulu would then cause

Disney to get the greater part stakes (64%) and subsequently better authority over the help.

Disney’s deal being too great to even consider denying.

As the arrangement was declared, the supplies of Fox continued to ascend for about 30%

in the following 2 quarters. This was a decent sign as financial backers were content with the

arrangement. Additionally, the total Disney was paying was not a terrible arrangement in itself

using any and all means. Taking into account how Disney outbid Comcast with considerably

higher deal, shows Disney was thoroughly sharp towards the arrangement.

Issues faced during the Acquisition

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Legitimate Issues

Since Disney claims the American Broadcasting Company (ABC), Comcast possesses the

National Broadcasting Company (NBC), and 21st Century Fox claimed the Fox Broadcasting

Company, a full obtaining of Fox by Disney or Comcast would have been illicit under the

Federal Communications Commission (FCC’s) rules precluding a consolidation between any of

two of the four significant transmission organizations.

Competitive offering by Comcast

Disney and Fox affirmed a $52.4 billion arrangement to combine the two organizations in

Dec 2017, forthcoming endorsement from the United States Department of Justice Antitrust

Division. In any case, later in May 2018, Comcast addressed speculation banks about fixing

Disney’s proposal to obtain Fox. Along these lines, in June 2018, Comcast mounted a bid of $65

billion for the 21st Century Fox resources that were set to be obtained by Disney. That prompted

Disney and Fox reporting that they had changed their past consolidation understanding,

increasing Disney’s proposal to $71.3 billion (a 10% premium more than Comcast’s $65 billion

proposition), while additionally offering investors the alternative of getting cash rather than

stock. This opposition from Comcast added a great deal to the last expense of securing for

Disney.

Conditional endorsement from power

US Department of Justice gave antitrust endorsement to Disney under the state of selling

Fox’s 22 territorial games stations inside 90 days of shutting, to which the organization had

concurred. This must be done on the grounds that, a full procurement of Fox by Disney would

have been unlawful under the Federal Communications Commission (FCC’s) rules denying a

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consolidation between any of two of the four significant transmission organizations, as it would

have build up Disney in an extremely monopolistic situation in the telecom/media industry.

Impact of the Merger on the Entertainment Industry

According to Brookey & Zhang (2020), By 2017, Disney Company and twentieth

Century Fox (that was the 21st Century Fox property) involved 15.38% and 12.75% of the

market (movies and TV) share individually, which could make a profoundly serious goliath

element in the market out of their consolidation. One more bidder for the arrangement, Comcast,

had 11.49% of the piece of the pie by then of time. Thinking about Comcast (possesses Universal

Pictures) would have broken the arrangement, it would in any case be an enormous union as far

as portion of the overall industry, arriving at near 25%. All things considered, Disney-Fox

consolidation prompted a much greater combination of around 28.13% of portion of the overall

industry, driving in front of the closest contender Warner Bros. (share 15.36%) by 12.77%

straightforwardly.

Also, 21st Century Fox nonetheless, possessed more film marks other than twentieth

Century Fox. Considering different names also, that are Fox Searchlight, Fox 2000 Pictures, and

others under Fox Digital Studio, this consolidation has most likely made a media goliath that

presently overwhelms the media business by a significant degree against the contenders.

Post-Acquisition Strategies

When the arrangement was concluded and settled, Disney brought the choice to close

down Fox 2000 Pictures, which is a sister studio to twentieth Century Fox, all recently possessed

by 21st Century Fox that currently are influenced quite a bit by. This securing had caused Disney

a lot of capital and along these lines Disney was investing amounts of energy to chop down its

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yearly uses in next couple of years. The choice to close down Fox 2000 Pictures was a piece of

that itself. This shut down came about in around 4000 cutbacks. The second thing was

eliminating the name “Fox” from the film names. The twentieth Century Fox film studio was

renamed to twentieth Century Studios. Similarly, Fox Searchlight Pictures will become

Searchlight Pictures. This choice was taken because of the basic standing Fox has, with its News

Organizations. This is to a greater extent a showcasing technique just to guarantee customers

don’t erroneously interface the Disney-possessed studio with Mr. Murdoch’s polarizing Fox

News.

Netflix and Disney +

Competing with Netflix was one of the significant inspirations of this procurement.

Presently Disney has begun to bring its substance down Netflix, and might be accessible at

Disney+ only. This is to guarantee purchasers have material explanations behind changing to or

picking Disney+ memberships.

Disney+ packaged memberships

As after the procurement, Disney currently possesses 60% stakes in Hulu too, which is an

all around set up real time feature. Disney has selected this procedure of packaging Hulu

alongside Disney Plus and ESPN+ membership to support the deals of the two its claimed web-

based features, presenting at $12.99 each month. Bundling gives space to limits for purchasers

when contrasted with buying in the administrations independently. This is one more advertising

move by Disney to catch the media streaming business sector. These means taken by Disney will

assist them with moving past the rebuilding stage and set up its web-based features on the

lookout.

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Conclusion

The Disney – Fox deal was spurred by changing industry elements and customer’s’

evolving behavior. This time of media utilization is of web-based features and home conveyance

of the substance. Customarily media giants think that it is hard to contend with web-based

features like Netflix and Amazon Prime. Despite the fact that an organization as of now stands

firm on an extraordinary foothold on the lookout and has a decent piece of the pie, on the off

chance that it won’t change with the changing elements and buyer requests, close by mechanical

turn of events, it will just lose its worth and may ultimately wilt away. Media industry today face

similar test as customers currently are keener on getting their substance conveyed to them and

approach it 24×7.

Media giants face the secret loss of significant worth by leasing their substance on these

real time features, as these administrations bring in cash out of their substance and starts to lead

the pack in the business. Disney and 21st Century Fox were both one of greatest media houses in

America, yet around the world. Subsequently, this very issue prompted the combination of the

two firms, by Disney obtaining 21st Century Fox. Such colossal solidification between enormous

organizations anyway prompts lesser number of organizations in the business and consequently

leads to oligopoly. In the event that the greater firms itself continue to procure one another, it is

not actually sound for the business overall over the long haul. Thinking about Disney, presently

Disney possesses not just Marvel Studios and Pixar, that has given the one of the greatest earning

films ever, Avengers Endgame and other marvel motion pictures to give some examples, yet in

addition the twentieth Century Studios and Searchlight Studio, that has likewise made grosser

films like Avatar. This makes Disney concentrated of a great deal of content and Intellectual

Property Rights. After the securing the main significant film houses left are Warner Bros.,

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Universal and Paramount, that together holds over 70% of the piece of the pie. This makes the

movies business an oligopoly.

This arrangement in any case, has prevailed with regards to making an incentive for the

purchasers. Accepting that Disney’s arrangements with Hulu and its own Disney Plus works out

positively, the real champ here ought to be the buyers.

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References

Brookey, R. A., & Zhang, N. (2020). The not-so Fantastic Four franchise: A critical history of

the comic, the films, and the Disney/Fox merger. Comics and Video games. Routledge.

Cassel, W. (2021, August 21). How Rupert Murdoch became a media tycoon. Investopedia.

https://www.investopedia.com/articles/investing/083115/how-rupert-murdoch-became-

media-tycoon.asp

Deloitte. (2019). Media & Entertainment Industry Outlook. Deloitte.

https://www2.deloitte.com/content/dam/Deloitte/us/Documents/technology-media-

telecommunications/us-tmt-2019-media-and-entertainment-industry-outlook

Fortune. (2021). FOX. Fortune. https://fortune.com/company/fox/

International Trade Administration. (2020, December). Media & Entertainment. Trade Gov.

https://www.trade.gov/media-entertainment

Miller, T. (2019, October 23). History of Disney: Timelines & Facts. Thestreet.

https://www.thestreet.com/world/history-of-disney-15136801

Navarro, J. G. (2021, August 12). Global revenue of the Walt Disney Co 2006-2020. Statista.

https://www.statista.com/statistics/273555/global-revenue-of-the-walt-disney-company/

Neal, A. (2020, May 13). Disney’s purchase of 21st Century FOX explained. Thedisinsider.

https://thedisinsider.com/2020/05/13/disneys-purchase-of-21st-century-fox-explained/

https://www.investopedia.com/articles/investing/083115/how-rupert-murdoch-became-media-tycoon.asp

https://www.investopedia.com/articles/investing/083115/how-rupert-murdoch-became-media-tycoon.asp

https://thedisinsider.com/2020/05/13/disneys-purchase-of-21st-century-fox-explained/

https://www.statista.com/statistics/273555/global-revenue-of-the-walt-disney-company/

https://www.thestreet.com/world/history-of-disney-15136801

https://www.trade.gov/media-entertainment

https://fortune.com/company/fox/

https://www2.deloitte.com/content/dam/Deloitte/us/Documents/technology-media-telecommunications/us-tmt-2019-media-and-entertainment-industry-outlook

https://www2.deloitte.com/content/dam/Deloitte/us/Documents/technology-media-telecommunications/us-tmt-2019-media-and-entertainment-industry-outlook

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Sergi, B. S., Owers, J., & Alexander, A. (2019). Valuation changes associated with the

FOX/Disney divestiture transaction. Economics and Sociology, 12(2), 36-47.

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