Move over AT&T-TimeWarner!
It’s official, Walt Disney has inked a US$52.4 billion deal to acquire 21st Century Fox.
News broke this morning that Disney has acquired Fox studios which now brings the top six studios to five. Therefore, Disney has maintained its lead obtaining 39.6% of the box office market share. The deal is subjected to antitrust regulation, similar to AT&T-TimeWarner, which will take two years to be approved.
Why a merger?
According to the official statement released, the consolidation will help Disney-Fox create movies that dominate the box office, as they share intellectual property.
What do I think?
Disney’s target audience has always been family-friendly while Fox has the leg up on reality TV which viewers gravitate to.
This merger also means job cuts and other cost-cutting measures as Disney feels the pressure of declining viewerships. Tech companies like Netflix and Amazon.com who offer online-streaming services have forever shifted the traditional TV viewership. Furthermore, sports enthusiasts will be impacted as well since Disney now has the monopoly and can now force higher fees for ESPN which will trickle down to its customer base.
Should you buy?
Despite this news, Disney is NOT a buy for me.
In Q4 of 2017, Disney reported lower-than-expected results and the company’s operating income is down by 11% year over year.
The stock is currently overvalued at 18.1x P/E compared to the industry P/E of 13.02x.
Need I say more …?
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