JEFFERIES: Disney's potential Fox deal could cost $40 billion (DIS, FOX, FOXA)

pulse

November 7, 2017 3:56 PM

The chunk of assets that Disney wants to buy from Fox could be worth $40 billion, according to Jefferies.

Disney reportedly held discussions with 21st Century Fox about buying a portion of its assets. Jefferies says those assets could be worth
$40 billion.

Disney reportedly held discussions with 21st Century Fox to buy a portion of its assets. According to Jefferies, those assets could be worth $40 billion.

The media and entertainment company is reportedly eyeing Fox's international cable networks, its Star film studio, and it's non-sports/non-news cable networks, such as FX and National Geographic. In the event of a deal, John Janedis of Jefferies believes Fox and its properties could be worth 40% above current levels, or $39 per share.

There's value in the "sum of the parts," Janedis notes, which could give Fox considerable upside. He estimates that the international cable networks are worth $14 billion at a multiple of 10x EBITDA, the film studio is worth $560 million at 9X EBITDA, the non-sports or news cable networks is worth $1.2 billion in 8.5X EBITDA, and stakes in SKY and other assets could be valued at $8.6 billion and $5 billion, in addition to Fox's 30% stake in Hulu.

Fox's shares have risen 10% since news of the discussions between the media conglomerates were revealed. Disney's shares have gone up 1.58%.

Rupert Murdoch, the media mogul behind Fox, has reportedly rejected Disney's offer as it currently stands.

"Given the potential structure, we do not think the remaining assets are appealing enough to FOXA as a standalone to complete a deal in the proposed form," Janedis wrote in a note. Disney would have to offer the company at least $37 billion to make the deal worth it.

Disney has recently made a series of investments to boost its direct-to-consumer video streaming services.

Fox's shares are trading at $28.27 though it has been lagging down 4.39% year over year. Disney stock is trading at $101.63 and is down 5.07% for the year.