Disney is aggressively moving forward with plans to satisfy regulators’ requirement that it sell its stake in A+E Networks’ factual channels in Europe in order to close its $71B takeover of 21st Century Fox.
The media giant has held talks with Hearst, its joint-venture partner in A+E Networks, about a buyout of channels such as History, Lifetime and Crime & Investigation in Europe, according to sources familiar with the discussions. Although Hearst would be a logical buyer, European analysts posited a number of rival bidders.
The Hearst discussions do not guarantee a deal between the parties. Still, the talks make sense given Disney’s need for a speedy exit, which would be aided by a deal partner versed in the networks’ operations.
Last week, the European Commission granted its provisional approval of the Disney-Fox merger. Its main condition is that Disney divests of its interests in History, H2, Crime & Investigation, Blaze and Lifetime in the European Economic Area, which is all of the countries in the European Union plus Iceland, Liechtenstein and Norway.
The EC found that in relation to the wholesale supply of TV channels, the merger “would have eliminated competition between two strong suppliers of ‘factual channels’ in several EEA Member States.” The EC highlighted that without divestment, the new organization would own both the National Geographic channels and the History channels.
Complicating matters, however, is the fact that A+E Networks does not wholly own the majority channels in this region. For instance, A+E Networks UK, which has 121M subscribers for 20 channels broadcasting across 90 countries in the UK, Nordics, Benelux, Central Europe, the Middle East and Africa, is a joint venture with Comcast-owned pay-TV giant Sky.
One analyst told Deadline that there would likely be a number of bidders. “There are other buyers for the channels as well,” she said. “It might make sense for [Sky owner] Comcast to buy it out.”
Guy Bisson, Research Director at Ampere Analysis, told Deadline, “Arguably the thematic channels fit better with the Comcast/Sky approach to the market than the Disney one. It’s interesting that everything is converging to almost push Disney/Fox down a direct-to-consumer route faster than they might otherwise have managed that migration and that includes the regulatory input from the EC on the A+E factual channels.”
A+E Networks has spent the last couple of years buying back control of its international channels that were first launched as JVs. It acquired NBC Universal International’s stake in its German joint venture in June 2017 and inked similar agreements in markets including Italy, South Korea and Japan. Former A+E Networks CEO Nancy Dubuc said last year that one of the key reasons to take back control of its brands allowed it to expand its non-linear footprint in markets that were being “disrupted quickly”. If A+E Networks controlled all of its international channels, it would make a deal with Hearst, or a rival bidder easier, but still does not address the matter of its Sky JV, which is its largest in the region.
Disney has signaled the first quarter of 2019 as the target for the close. The European Commission’s determination has no bearing on A+E cable operations in the U.S. and elsewhere. (H2 was rebranded as Viceland in the U.S. in 2016.)
European regulators determined that combining Fox and Disney’s film studios raised no concerns because the merged company still faces significant competition from other film studios, including Sony, Universal and Warner Bros. After selling two-thirds of itself to Disney, Fox will consist of the broadcast network, cable networks like Fox News, and local TV stations.
Hearst and Disney declined to comment on any discussions.