Disney-Fox Analysts Call: $2B In Cost Synergies

On a conference call with analysts discussing a $52.4B acquisition of key media assets of Twenty-First Century Fox , Disney chief Bob Iger notes:

• The deal should close in 12-18 months and highlighted the chance to expand Fox's Avatar franchise particularly considering new theme park lands.
• Along with the chance to unify rights and bring more content (X-Men, Fantastic Four, Deadpool) into the Marvel Cinematic Universe, Disney gets Fox's distribution rights to the first Star Wars film.
• After speculation that Fox CEO James Murdoch would come into Disney in a senior role and perhaps become a succession candidate for Iger, Iger says while Murdoch will be "integral" to combining the companies, "he and I will be discussing whether there is a role for him or not at our company."
• The deal will be accretive to EPS for the second fiscal year after closing, says Disney CFO Christine McCarthy, and Disney expects roughly $2B in cost synergies by 2021.
• With Fox continuing to pursue a buyout of the rest of Sky before its Disney transaction, McCarthy says Disney's leverage will be about 2.9x total debt/EBITDA; 2.2x if the Fox/Sky deal is not completed. The company expects to return to historical leverage levels in any case 24 months after deal completion.
• Taking majority control of Hulu is going to be beneficial and result in "flowing more content in Hulu's direction," and managing Hulu "becomes a little more clear, a little more effective" in the new era, Iger says.
• Fox's regional sports networks are a "perfect complement" to ESPN's offerings, which are national in nature and will benefit from regional focus, Iger says.

Iger expects the deal to receive a "significant amount of regulatory scrutiny" both in the U.S. and internationally, but that it will be important to remember the "aim of this combination is to create more high-quality product for consumers around the world" and to deliver it in more compelling ways.