Three reasons why Star India is a sweetener in Disney’s $52 billion deal with Fox

By: | Published: December 15, 2017 10:15 AM

After Disney announced a deal worth $52 billion with Fox, industry insiders and experts say that Fox's extensive India arm—Star India Pvt Ltd, is a sweetener in the deal.

Disney has announced a deal worth USD 52 billion, with Rupert Murdoch-controlled 21st Century Fox. (Image: Reuters)

In what is being seen as the media “Deal of the Century,”  the Walt Disney Company announced that it had reached a deal to buy most of 21st Century Fox, the empire controlled by Rupert Murdoch, in an all-stock transaction valued at roughly $52.4 billion. Disney had announced an aggressive plan to introduce two streaming services by 2019. This deal is seen to provide the muscle to Disney, to challenge Netflix, Apple, Amazon, Google and Facebook in the fast-growing realm of online video.  “The pace of disruption has only hastened. “This will allow us to greatly accelerate our direct-to-consumer strategy, which is our highest priority,”New York Times reported Robert A. Iger, Disney’s chief executive and chairman of , as saying. Back home, industry insiders and experts say that Fox’s extensive India arm—Star India Pvt Ltd, is a sweetner in the deal. Interestingly, While Disney has a market cap of $164 billion, 21st Century Fox is worth over $62 billion, with Star India alone estimated to be worth $14-16 billion. We explore three reasons why Star India is an important for Disney.

Disney keen on Fox’s India market share

The businesses of Fox in India, under Star TV, is estimated to account for at least one-fourth of the valuation Disney is paying for the game-changing acquisition, according to a report in Times of India. “Back-of-the-envelope calculations based on comparables may value Star Entertainment India’s business itself at $14-15 billion based on $500 million ebitda in the current fiscal.” the newspaper reported Sanjay Jain, director, Taj Capital, a New Delhi-based investment advisory as saying. “It (Star) is actually more than just a sweetener. The number of references that Bob Iger (Disney chairman and CEO) madeon Fox’s India market share is significant,” an industry analyst told Times of India.

Hotstar and IPL in Disney’s kitty

Experts point out that, with this deal, Disney will get access to Hotostar and also IPL cricket rights, helping it to move create a very aggressive online presence. “The growth delta in emerging sports, for instance, is a lot higher. And then you have the aggression with which Star recently went ahead in acquiring a property like the Indian Premier League (media rights bought at $2.55bn). So, it’s a pretty unique asset. Between sports and entertainment, Star India’s market share alone is over 20%,” the Times of India report quoted an analyst as saying.

Quicker growth

According to industry insiders, Fox is seen as a company that operates on a global scale, Sky- the media conglomerate is seen as a player in mature markets. “The thing with Disney, Comcast and others is that most of the value they created is within America. They have taken their American content and sold it out of the US. Fox is the only company that has truly managed a global business (Sky in Europe, Star in India). Even within these two, Sky happens to be a mature player in a mature market while Star happens to be an exciting business in a fast-growing market. That’s the remarkable thing,” the newspaper quoted a person aware of the development say saying.

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