8-K: News Corp to Sell Foxtel to DAZN for A$3.4 Billion, Securing Minority Stake and Loan Repayment

News Corporation has reached a definitive agreement to sell its Foxtel business to DAZN for an enterprise value of A$3.4 billion, receiving a minority stake in DAZN and repayment of outstanding loans.

Summary

• News Corporation has agreed to sell 100% of its Foxtel business to DAZN for an enterprise value of A$3.4 billion.
• The deal includes News Corp receiving newly issued shares in DAZN, repayment of A$578 million in outstanding loans, and the transfer of Foxtel's remaining debt.
• Telstra will also sell its minority interest in Foxtel, receive A$128 million in loan repayments, and take a minority stake in DAZN.
• News Corp will hold approximately a 6% minority equity interest in DAZN and a seat on its Board of Directors.
• The transaction is expected to close in the second half of News Corp's fiscal year 2025, subject to regulatory approvals and other closing conditions.
• Foxtel will be classified as discontinued operations for News Corp's financial reporting purposes starting in the second quarter of fiscal 2025.
• The enterprise value of A$3.4 billion represents more than 7 times Foxtel's fiscal 2024 EBITDA.

Sentiment

Score: 8

Explanation: The document conveys a positive sentiment due to the strategic sale of Foxtel, the repayment of loans, and the minority stake in a growing global streaming platform. The deal is presented as beneficial for all parties involved.

Positives

• News Corp will receive a significant cash injection through the repayment of shareholder loans.
• News Corp will gain a minority stake in DAZN, a growing global sports streaming platform.
• The transaction allows News Corp to simplify its structure and focus on key growth areas such as Dow Jones, Digital Real Estate Services, and Book Publishing.
• Foxtel will benefit from DAZN's global reach and technology, enhancing its position as a digital-first, streaming-focused business.
• The deal provides international exposure to Australian sport and brings Australian sports fans greater access to global programming.
• The transaction is expected to improve News Corp's credit profile.

Negatives

• News Corp will lose control of Foxtel, a significant part of its subscription video services business.
• The transaction is subject to regulatory approvals and other closing conditions, which could delay or prevent the deal from closing.
• The value of the minority stake in DAZN is subject to the performance of DAZN.

Risks

• The transaction is subject to regulatory approvals, which may not be granted or may be delayed.
• The closing of the transaction is subject to customary closing conditions, which may not be met.
• The value of the DAZN shares received by News Corp is subject to market fluctuations and DAZN's performance.
• There is a risk that the expected benefits of the transaction may not be fully realized.

Future Outlook

The transaction is expected to close in the second half of News Corp's fiscal year 2025. News Corp will focus on its key growth segments: Dow Jones, Digital Real Estate Services and Book Publishing. DAZN will continue to expand into new markets and across more sports.

Management Comments

• News Corp Chief Executive Robert Thomson stated that the deal is a victory for News Corp shareholders, DAZN, and sport fans, and that Foxtel has been transformed into a genuine digital and streaming leader.
• Shay Segev, Chief Executive Officer of DAZN, said that the deal is an incredibly exciting opportunity for DAZN to enter a key market and that they are committed to supporting and investing in Foxtel's services.
• The Chairman of Foxtel, Siobhan McKenna, said the agreement with DAZN was international recognition of the transformation of Foxtel.
• Foxtel Group CEO Patrick Delany said that News Corp's support has seen Foxtel successfully reinvent itself and that they are excited to embark on the next chapter with DAZN.

Industry Context

This announcement reflects the ongoing trend of consolidation in the media and streaming industry, with traditional pay-TV businesses like Foxtel seeking to leverage the global reach and technology of streaming platforms like DAZN. It also highlights the increasing importance of sports content in the streaming landscape.

Comparison to Industry Standards

• The valuation of Foxtel at more than 7x fiscal 2024 EBITDA is within the range of recent media and entertainment transactions, but specific comparisons are difficult without detailed financial information.
• DAZN's revenue growth of over 50% on average from 2020 to 2023 indicates a strong growth trajectory, which is comparable to other fast-growing streaming platforms.
• The move by News Corp to divest Foxtel and focus on other growth pillars is similar to strategies adopted by other media companies seeking to streamline their operations and focus on higher-growth areas.
• The transaction is similar to other deals where traditional media companies are partnering with or being acquired by streaming platforms, such as the merger of WarnerMedia and Discovery to form Warner Bros. Discovery.

Stakeholder Impact

• Shareholders of News Corp will benefit from the cash repayment of loans and the minority stake in DAZN.
• Foxtel employees will continue to operate under the same management team.
• Foxtel customers will gain access to a broader range of sports content through DAZN's global platform.
• Telstra will receive cash for its loans and a minority stake in DAZN.

Next Steps

• The transaction is subject to regulatory approvals and other customary closing conditions.
• The transaction is expected to close in the second half of fiscal year 2025.
• Foxtel will be classified as discontinued operations for News Corp starting in the second quarter of fiscal 2025.

Key Dates

Keywords

Foxtel, DAZN, News Corp, Telstra, Acquisition, Streaming, Sports, Digital, Shareholder Loans, Minority Stake, Enterprise Value, EBITDA