Shareholder Lawsuit Could Disrupt Disney/Fox Deal

Disney/Fox Deal, Shareholder Lawsuit

The ongoing Disney/Fox deal may be stymied, as some of Fox’s shareholders have filed a lawsuit to stop it in Delaware federal court on Friday, June 6.

According to The Hollywood Reporter, the group is led by Robert Weiss. His argument consists of a few points, including that Goldman Sachs and Centerview Partners, which did the financial valuation analyses, have a conflict of interests which was not disclosed. Furthermore, he argues that there are not forecasts provided for the streaming service Hulu or the European broadcaster Sky, two properties involved in the transaction.

Shareholders from Fox are planned to vote on the deal on July 27, but the lawsuit says “unless remedied, [21st Century Fox]’s public stockholders will be forced to make a voting or appraisal decision on the Proposed Transaction without full disclosure of all material information concerning the Proposed Transaction being provided to them.”

The deal, which was initially made last December, would have Disney acquire nearly all of Fox’s intellectual properties in exchange for $52.4 billion; this was later bumped up to $71.3 billion, to counter a rival offer from Comcast. Given the huge size of both companies, and the delicate balance that currently exists between the major studios, this deal could rock all of Hollywood and change the entertainment industry as we know it.

As a result, it has always been a risky proposition. Such a large merger requires the Department of Justice to sign off on it, making sure that it does not violate any antitrust laws; this is even more true now, since President Trump made it an issue on his campaign. It is thus a surprise that the Department of Justice has approved of the deal in just six months, their main concern being that Disney not acquire Fox’s 22 regional sports networks (since it already owns ESPN). The parties involved seem to have worked quickly to smooth out things that they knew would be issues.

Reportedly, Disney’s motive in this deal is not to acquire Fox’s superhero properties for the Marvel Cinematic Universe, as some believe, but rather to add Fox’s vast library to its upcoming streaming service. The Mouse House wants to best Netflix as the top online platform, and its sudden acquisition of everything from The Simpsons to Avatar to Alvin and the Chipmunks could seriously help with that goal.

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